Social Security Strategies for Baby Boomers

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2 Social Security Strategies for Baby Boomers Thank you for downloading our Social Security Strategies for Baby Boomers ebook. Please feel free to share this ebook with your friends and family. A quick bio of who I am so you feel comfortable taking action with the information provided here. My name is Jeffrey Biro and I started helping people plan for their retirement back in I specialize in Baby-Boomers who are interested in Retirement Income Planning Solutions. I am the President of Family Wealth Advisors, LLC and Biro Financial & Retirement Services. We are located in Scottsdale, Arizona at the Scottsdale Fashion Square Mall area. I have my Series 6, 63 and 65 investment registrations. I am an RFC- Registered Financial Consultant, CEP- Certified Estate Planner and a CCPS-Certified College Planning Specialist. I also hold life and health insurance licenses and I understand Medicare Parts A-B-C-D entirely. My specialty is working with baby boomers 55 years and older, having $250,000 or more to invest who are interested in Retirement Income Planning Solutions.

3 We are always here to answer any questions you have and if you live in the Phoenix / Scottsdale AZ area, please feel free to come by any of our FREE seminars covering Social Security and Medicare. You can RSVP for a seminar by going here: I write a weekly blog to help people better understand investing, planning for retirement, & estate planning. I am also very active on Twitter. Please feel free to tweet me anytime. We have also set up some short videos to help you learn more about retiring, social security, and even a video on wealth just for the ladies. Social Security:

4 Women & Wealth: How to maximize your retirement readiness: I hope you enjoy this short, yet VERY informative ebook. To your retirement success, Jeffrey Biro Biro Financial & Retirement Services Family Wealth Advisors, LLC 6900 E Camelback Rd Suite A39 Scottsdale, AZ

5 DISCLAIMER Copyright 2015 Biro Financial & Retirement Services Securities, advisory services and insurance products are offered through Investment Centers of America, Inc. (ICA), member FINRA/SIPC and a Registered Investment Advisor and affiliated insurance agencies. ICA, Biro Financial and Retirement Services and Family Wealth Advisors, LLC are separate companies. Investment Centers of America, Inc. (ICA) does not provide tax or legal advice. All Rights Reserved ICA Privacy Policy IMPORTANT CONSUMER INFORMATION: This book is for informational purposes only and is not intended to be a solicitation or offering of any security and: Representatives of a Registered Broker-Dealer ( BD ) or Registered Investment Advisor ( IA ) may only conduct business in a state if the representatives and the BD or IA they represent (a) satisfy the qualification requirements of, and are approved to do business by, that state; or (b) are excluded or exempted from that state s registration requirements. Representatives of a BD or IA are deemed to conduct business in a state to the extent that they would provide individualized responses to investor inquiries that involve (a) effecting, or attempting to effect, transactions in securities; or (b) rendering personalized investment advice for compensation. We are registered to offer securities in the following states: AZ, CA, FL, ID, MO, PA, TX, WA.

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7 GETTING READY FOR YOUR RETIREMENT Signing up for Social Security, Medicare & getting ready to retire can be a challenging time in your life, but also a very exciting time! You are getting ready to enter the next phase of your life and making sure everything is set up correctly is very important. Not only do you need to get all of your finances and medical insurance issues in alignment, you need to plan with your spouse, about how you are going to spend your time in retirement. This short and actionable ebook will help you learn some nuances of Social Security so you can maximize the benefits you receive and hopefully have a very enjoyable retirement. After all, it is what you have worked your entire life for, right? 1

8 SOCIAL SECURITY WHEN SHOULD YOU RETIRE? When you are younger, you tend to think of Social Security benefits in simple terms the retirement money you get when you are older. As you age and get closer to receiving those benefits, you begin to notice the complex variables and options pertaining to the claiming decision. Conventional wisdom says you should wait until full retirement age (66 or 67 depending on when you were born) to claim Social Security. Ideally everyone would wait that long, but sometimes, employment and/or health issues force people to claim benefits sooner. Your Social Security claiming decision is one of the biggest financial decisions you will make during your life. 2

9 WHO WILL HELP YOU WITH IT? If you apply without fully knowing the rules, you could end up leaving thousands of dollars on the table over your lifetime. Social Security is often the largest and most mismanaged asset in people s retirement plans. For example; did you know that 74% of Americans receive reduced benefits (1) because they don t know how to claim the right benefits? Americans can earn up to 76% (2) more if they delay their benefits from age 62 to 70 years old. While claiming benefits sounds easy most people go about it in the wrong way. American retirees take 38% (3) of their retirement income from Social Security. As always, part of your Social Security benefits may be taxed. This may happen if you exceed the program s combined income threshold. (Combined income = adjusted gross income + non-taxable interest + 50% of Social Security benefits.) (4) And this is just the beginning! Citations: (1). Social Security Administration Annual Statistical Supplement 2013 (2). Social Security Administration. When To Start Receiving Retirement benefits 2014 (3). Forbes; 44 Social Security Secrets All Baby Boomers Need To Know 2012 (4). ssa.gov/planners/taxes.htm

10 The Social Security Administration (SSA) says there are 567 ways to collect, yet offer no advice. You are on your own to research everything. As you get ready to apply for Social Security, you need to run the numbers, know the details on spousal benefits, widows benefits, benefits for children, (some children are eligible for Social Security) and more. You would be wise to visit with a professional financial planner who can go over the rules and help you with your Social Security claiming decision for your unique situation. Here is a good tip. Note to self: if you ve already started taking Social Security if it s been within one year, you can reset your benefit preferences 4

11 DECIDING WHEN TO SIGN UP FOR SOCIAL SECURITY The chart below from the ssa.gov website shows the credit per year based on the year you were born. Delayed retirement credit Year of birth Credit per year % % % % % % % % % % 1943 and later 8.0% People born in 1943 or later earn an extra 8% per year if they wait to retire until age 70. Note: Persons born on January 1 of any year should refer to the credit percentage for the previous year. This is explained in the link below. 5

12 Full retirement age is 66 if you were born from 1943 to The reduction of your benefits at age 62 is 25 percent; at age 63, it is about 20 percent; at age 64, it is about 13.3 percent; at age 65, it is about 6.7 percent. There is a full chart showing benefit percentages based on year born and age retired at the link below. If you were born 1960 or later, then full retirement age is 67. People born 1960 or later & who wait until 70 to retire, will receive 124% of their benefits! 6

13 WHAT DOES THIS ALL MEAN FOR YOU? When it comes to the question of Social Security income, the choice looms large. Consider what you know (and don t know). You know how much retirement income you have; you may have a clear projection of retirement income from other potential sources. Other factors aren t as foreseeable. You don t know exactly how long you will live, so you can t predict your lifetime Social Security payout. You may even end up returning to work again. 7

14 REMEMBER THE EARNINGS LIMIT! Here is a hypothetical baby boomer example. Our boomer decides to apply for Social Security at age 62 in 2015, yet stays in the workforce. If he/she earns more than $15,720 in 2015, the Social Security Administration will withhold $1 of every $2 earned over that amount. (1) How does the SSA define income? If you work for yourself, the SSA considers your net earnings from selfemployment to be your income. If you work for an employer, your wages equal your earned income. (2) Please note that: the SSA does not count investment earnings, interest, pensions, annuities and capital gains toward the current $15,720 earnings limit. (2) 8

15 Some fine print worth noticing. Did you know that the SSA may define you as retired even if you aren t? (This actually amounts to the SSA giving you a break.) For 2014, the SSA considered you retired if you were under full retirement age for the entire year and your monthly earnings were $1,290 or less. (3) If you are self-employed, eligible to receive benefits and under full retirement age for the entire year, the SSA generally considers you retired if you work less than 15 hours a month at your business. (3) Here s the upside of all that: If you meet the tests mentioned in the preceding paragraph, you are eligible to receive a full Social Security check for any whole month of a year in which you are retired under these definitions. You can receive that check no matter what your earnings total for all of that year. (3) Citations: (1) - forbes.com/sites/janetnovack/2014/10/22/social-security-benefitsrising-1-7-for-2015-top-tax-up-just-1-3/ [10/22/14] (2) - ssa.gov/retire2/whileworking2.htm [11/4/14] (3) - socialsecurity.gov/retire2/rule.htm [11/6/14] 9

16 SOCIAL SECURITY CLAIMING STRATEGIES What can married couples do to increase joint lifetime benefits? Roughly half of retirees claim Social Security benefits at age 62, as soon as they become eligible. Some people delay benefits and postpone using their retirement savings as an income source. Others apply out of necessity; their financial situation leaves them little choice. (1) There are claiming strategies that may bring spouses much greater cumulative lifetime Social Security income, and they depend on one spouse waiting until age 66 to apply for benefits. That may be the time for a file & suspend strategy 10

17 This tactic positions a married couple to receive maximum Social Security benefits at age 70, with one spouse being able to claim some benefits at age 66. An example: Terry was born in 1947 and Teresa was born in 1951, so full retirement age is 66 for both of them. Terry files his claim for Social Security benefits at age 66, but then he elects to suspend his $2,000 monthly retirement benefit. Doing that clears the way for Teresa to get a $1,000 monthly spousal benefit when she reaches 66; she can do this by filing a restricted claim for spousal benefits only at that time. (4) 11

18 So while some spousal benefits are rolling in, Terry and Teresa have both elected to put off receiving their own Social Security benefits until age 70. That allows each of them to rack up delayed retirement credits (8% annually) between the ages of So when Terry turns 70, he is eligible to collect an enhanced benefit: $2,640 per month instead of the $2,000 per month he would have received at age 66. At 70, Teresa can switch from receiving the $1,000 monthly spousal benefit to collecting her enhanced benefits. (1,4) Variations on file & suspend. There are other ways to do this. For example, 66-year-old Terry could initially apply for Teresa s spousal benefits as Teresa applies for her own benefits at

19 Terry thereby gets $800 a month while Teresa receives her own reduced benefit of $1,200 a month. At 70, Terry foregoes getting the spousal benefit and switches to receiving his own enhanced benefit ($2,640 a month thanks to those delayed retirement credits). If Terry lives to age 83 and Teresa lives to age 90, their total lifetime Social Security benefits will be $1,043,520 under this strategy, as opposed to $840,600 if they each apply for benefits when they turn 62. (1) Widows can also use a variant on the file-and-suspend approach. As an example, Fran is set to receive $1,400 monthly from Social Security at age 66. Her husband dies when she is

20 She can get a widow s benefit of $1,430 at 60, but instead she claims her own reduced benefit of $1,050 at age 62, then switches to a widow's benefit of $2,000 at 66 (her husband would have received $2,000 monthly at age 66). By doing this, she positions herself to collect $112,000 more in lifetime benefits. (1) Postponement can also be used to enlarge survivor benefits. Let s go back to Terry and Teresa: if they each start getting Social Security at 62, Teresa is looking at a $1,650 monthly survivor benefit if Bob passes away. But if Terry waits until 66 to claim his benefits, Teresa s monthly survivor benefit would be $2,

21 Details to note. The file-and-suspend strategy is only allowable if one spouse has reached full retirement age. In order for you to claim a spousal benefit, your husband or wife has to be getting Social Security benefits. Applying for Social Security before full retirement age with the idea that your spouse can collect spousal benefits at 62 has a drawback: you are reducing both of your lifetime retirement benefits. (5) By the way, only 29% of respondents in a 2012 AARP survey knew that waiting until age 70 to apply for Social Security would bring them their maximum monthly benefit. I hope you feel smarter now! Citations. (1) (2) (3) (4) (5) (6)

22 SOCIAL SECURITY STRATEGY SUMMATION The longer you wait to retire, up to age 70, the larger your benefits will be from Social Security. If you were born in 1960 or later, that could equal 124% of your expected benefit amount! If you continue to work after you apply for Social Security and you earn more than $15,720 in 2015, the Social Security Administration will withhold $1 of every $2 earned over that amount. The SSA does not count investment earnings, interest, pensions, annuities and capital gains toward the current $15,720 earnings limit. You can be defined as retired if you were under the full retirement age for the entire year and your monthly earnings were $1,290 or less. If you are self-employed, eligible to receive benefits and under full retirement age for the entire year, the SSA generally considers you retired if you work less than 15 hours a month at your business. Congratulate yourself for knowing that waiting until age 70 to apply for Social Security will bring you the maximum monthly benefit. You should now have a very good idea of where you are and what would best suit you as far as Social Security is concerned. While I admire you for wanting to take action on your own, with all of the changes the government does with Social Security on a consistent basis, I want to advise you to seek out a qualified financial planning expert who specializes in Baby Boomers and their needs. Most financial planning professionals, like us, offer a free Social Security optimization report. This can really help you make the best choices for your retirement! 16

23 If you are in Arizona, please contact me right away and let s take a quick look at where you are at right now, today! If you are out of Arizona, please search for a financial planner who specializes in baby boomers. They are out there and you can most likely find them on the internet. Thank you for reading this short ebook. If we can help you in any way, please contact us right away. Sincerely, Jeffrey Biro Biro Financial & Retirement Services Family Wealth Advisors, LLC 6900 E Camelback Rd Suite A39 Scottsdale, AZ