2011, 2012 Gryphon Financial & Insurance Services, Inc. All rights reserved. Ver. 1 (8/11)

Transcription

1 1

2 Advisor: Add information here about you (for example): Name Designation(s) License Number(s) Office Address Tel/Fax Number(s) address Website Etc. 2

3 The information contained in this presentation is of a general nature and not intended to provide any specific advice on the topic. This material is not intended as tax or legal advice. It may not be used for the purpose of avoiding any federal tax penalties. Please schedule a complimentary consultation with your financial professional to discuss the specifics of your personal situation. 3

4 Don t be fooled into thinking Social Security is a slam-dunk! Understand the basics, Learn about the quirks, And be better prepared to make informed decisions... decisions that may impact your benefit check for years to come. 4

5 The Basics What is Social Security? History Entitlement? Qualifying for Social Security When Can You Collect? Age to Receive Full Benefits Pros and Cons Factors Affecting Benefits Taxes and Your Social Security Benefit Working and Collecting 5

6 Social Security is a program of old-age, unemployment, health, disability, and survivor s insurance. It is maintained by the U.S. Federal Government. And, funded via compulsory payments by specific employer and employee groups. Source: 6

7 President Roosevelt signed the Social Security Act into law on August 14, It created a social insurance program designed to pay retired workers (age 65 or older) a continuing income after retirement. This was in addition to several provisions for general welfare. Source: It sought to address the long-range problem of economic security for the aged through a contributory system in which workers themselves contributed to their own retirement benefits. As a result of increases in average life expectancy, a 1983 Amendment included a provision for raising the full retirement age (which had been 65) beginning with people born in 1938 or later. 7

8 Definition of entitlement: The act of entitling. The state of being entitled. The right to guaranteed benefits under a government program, as Social Security or unemployment compensation. One can reasonably conclude that if you pay into something, you are entitled to receive the benefit. Are you entitled to collect? 8

9 Everyone born in 1929 or later needs 40 Social Security credits (sometimes referred to as a quarter of coverage) to be eligible for retirement benefits. You can earn up to four credits per year, so you will need to work at least 10 years to become eligible for retirement benefits. During your working years, earnings covered by Social Security are posted to your Social Security record, and you earn credits based on those earnings. 9

10 Each year the amount of earnings needed for a credit rises as average earnings levels rise. In 2012, that number is one credit for each $1,130 of earnings. If you become disabled or die before age 62, the number of credits needed depends on your age at the time you die or become disabled. A minimum of six credits is required regardless of your age. Source: ; Rev. 1 (1/12) 10

11 Monthly benefit amount will depend on the age you start receiving benefits... As early as 62 As late as 70 What works BEST for YOU? Source: 11

12 1937 or earlier and 2 months and 4 months and 6 months and 8 months and 10 months and 2 months and 4 months and 6 months and 8 months and 10 months 1960 and later 67 NOTE: If you were born on January 1 st of any year, you should refer to the previous year. Where are YOU on this chart? Source: 12

13 When you start receiving as early as Reduced benefits. When you start receiving as late as Increased benefits. May be eligible for delayed retirement credits that would increase your monthly benefit. Which scenario fits YOUR personal situation? Source: 13

14 Wages Self-Employment Military Service Railroad Earnings Household Employment Federal Government Employment* State and local Government Employment* Farm Work Nonprofit and religious organizations Work outside the U.S. If you fall within any of these categories, schedule a consultation to determine the effect on your benefit. *The Government Pension Offset (GPO) and Windfall Elimination Provision (WEP) will be briefly discussed later in this presentation. Source: 14

15 Some people must pay taxes on their Social Security benefits (as high as 85%) generally, only if they have substantial income such as wages, self-employment, interest, dividends, and other taxable income that must be reported on their tax return. If this applies to you, schedule a consultation today. Source: 15

16 There is no limit on your earnings starting with the month you reach full retirement age! NOTE: If you apply for benefits more than six months after you reach full retirement age, payment of benefits is limited to six months. 16

17 If you are below full retirement age for the entire year, $1 in benefits will be deducted for each $2 you earn above the limit limit is $14,640. In the year you reach full retirement age... $1 in benefits will be deducted for each $3 you earn above the limit (only earnings before the month you reach full retirement age are counted). If you reach full retirement age in 2012, the limit on earnings for the months before full retirement age is $38,880. Source: ; Rev. 1 (1/12) 17

18 The Specifics Quirk #1 File and Suspend Case in Point: Quirk #1 Quirk #2 Collect Some Now, More Later Case in Point: Quirk #2 Quirk #3 Claiming Social Security After Divorce Case in Point: Quirk #3 Quirk #4 Claiming Survivor Benefits When Your Ex Dies Case in Point: Quirk #4 Quirk #5 A Public Pension & Social Security Benefits NO! Case in Point: Quirk #5A WEP Case in Point: Quirk #5B GPO 18

19 File for benefits so your spouse or dependent children can collect benefits based on your earnings record. Immediately suspend your own benefits delay claiming them until they are worth more at an older age. Must be at least full retirement age to claim this benefit not available to individuals who claim benefits earlier. This strategy works best if one spouse has significantly higher lifetime earnings than the other. Older workers (married or single) with dependent minor children can take advantage of this strategy. Source: Secrets to Maximizing Social Security, August 5,

20 Susie (a 65-year old divorcee) has 12-year old twins. Next year, when she turns 66, each twin will be entitled up to one-half of her benefit until they turn 18. Using the file and suspend strategy, Susie will file and suspend (her) benefits until age 70 at which time her check will be $2,250 per month instead of $1,640. This is a hypothetical example to illustrate the file and suspend strategy and the benefit of waiting longer to collect benefits. Numbers are not reflective of any real person or circumstance. 20

21 Collect half of your spouse s benefits now, delay collecting your own benefits until later. Works best for two-career couples. Must be at least full retirement age to claim this benefit. Source: Secrets to Maximizing Social Security, August 5,

22 Robert is a retired military officer who currently teaches at a local university. Rebecca (his wife) worked as a Library Assistant her entire life. Robert, at age 66, filed for Social Security limiting his claim to spousal benefits based on Rebecca s earnings. By delaying his own retirement benefits, Robert will collect $2,100 per month at age 70, compared to $1,500 had he started to collect at 66. This is a hypothetical example to illustrate the collect some now, more later strategy. Numbers are not reflective of any real person or circumstance. 22

23 If you are divorced or soon-to-be divorced, and were the low earner, you may be entitled to benefits on your former spouse s earnings record (and it won t cost that former spouse a penny). Had to be married at least 10 years. Must be at least 62 years old to collect. If you remarry, you will lose the benefit of your former spouse, at least until that second marriage ends in death or divorce. In this situation, you may be able to claim the best benefits between former spouses. 23

24 For the most part, rules for divorced couples are the same as those for married couples. When you are at full retirement age, a spousal benefit is generally 50% of your ex-spousal s benefit. If not at full retirement age, the benefit is reduced by a certain percentage each month. The longer you wait, the more you get. 24

25 ONE DIFFERENCE: If your ex-spouse has not applied for benefits, you may be allowed to collect anyway. Ex-spouse may be eligible for benefits (which means he/she must be at least 62 years of age). You must be divorced for at least two years. Because divorced women tend to have lower wages, they usually have the most to gain. 25

26 If you have not accumulated enough Social Security credits to be eligible for Medicare on your own, you may also be eligible for free Medicare Part A benefits based on your ex-spouse s earnings record. Need certified copy of divorce decree. Helpful to have ex-spouse s social security number. Ex will not be notified. Ex s benefits will not be affected nor will his or her new spouse. Source: Claiming Social Security After Divorce, May 1,

27 Bill is 64 years of age (is single) and has been divorced for five years (after 23 years of marriage). In two years, when he turns 66 (full retirement age) he plans to apply for 50% spousal benefit on is ex-wife s earnings. If you are the higher earner, you must be of full retirement age to be able to choose between a spousal benefit and your own benefit. When Bill turns 70 (in six years) he will apply for his own benefit which will be significantly higher as a result of delaying collecting until 70. This is a hypothetical example to illustrate the claiming SS after divorce strategy. Numbers are not reflective of any real person or circumstance. 27

28 Must have been married at least ten years. At full retirement age the benefit will be 100% of the deceased ex-spouse s benefit. Will be reduced if you claim earlier. Can actually start receiving as young as age 60 (age 50 if disabled). 28

29 If you are already receiving a benefit on your own earnings record, you will continue to receive your own check plus a check for the difference between your benefit and the survivor benefit. If you were collecting a spousal benefit on your ex-spouse s record, you can switch to a survivor benefit if the ex dies. If you remarry after age 60, you can still receive the survivor benefit. Source: Claiming Social Security After Divorce, May 1,

30 Kevin and Kathleen have been married for 9 years and 10 months. They have agreed to divorce, but delayed the date of the final divorce decree until after their 10-year anniversary. Waiting will satisfy the 10-years of marriage requirement and position Kevin or Kathleen to collect survivor benefits when one passes. Timing is critical! This is a hypothetical example to illustrate the claiming survivor benefits when your ex dies strategy. Numbers are not reflective of any real person or circumstance. 30

31 Under federal law, any benefits you earned will be reduced if you were a federal, state, or local government employee who earned a pension on wages that were not subject to Social Security withholding. The two rules that cover this are... The Windfall Elimination Provision (WEP) The Government Pension Offset (GPO) These two rules reduce benefits and catch many individuals by surprise! Will they affect you? Source: A Public Pension and Full Social Security Benefits? No Way, Sept 10,

32 The WEP affects how the amount of your retirement or disability benefit is calculated if you receive a pension from work where Social Security taxes were NOT taken out of your pay. A modified formula is used to calculate the benefit amount resulting in a lower benefit than you may otherwise have received. This is a confusing rule - schedule a consultation today if this applies to you. Source: (SSA Publication No ) 32

33 Mike turns 62 in The first $749 of average monthly earnings is multiplied by 90%. The next $3,768 by 32%. The remainder by 15%. The sum of the three amounts equals the total monthly payment amount. There are exceptions! This is a confusing rule - schedule a consultation today if this applies to you. This is a hypothetical example to illustrate the Windfall Elimination Provision rule. Numbers are not reflective of any real person or circumstance. 33

34 If you receive a pension from a government job (federal, state, or local) in which you did NOT pay Social Security taxes, some or all of your spouse s, widow s, or widower s Social Security benefit may be offset. Benefits will be reduced by two-thirds of your government pension. This is a confusing rule schedule a consultation today if this applies to you. Source: (SSA Publication No ) 34

35 Henry receives a Civil Service Pension in the amount of $600 per month. Hannah, his wife, is eligible for a $500 Social Security spouse s benefit. Under the GPO rule, Hannah s benefit will be reduced by two-thirds (of Henry s Civil Service Pension). Two-thirds of $600 is $400. Hannah will get $100 ($500 - $400 = $100) This is a confusing rule schedule a consultation today if this applies to you. This is a hypothetical example to illustrate the Government Pension Offset rule. Numbers are not reflective of any real person or circumstance. 35

36 Annual Statements Suspended Direct Deposit Student Loans Government Do-Over (Modified) Cost-of-Living Adjustment (COLA) Compassionate Allowances Program (CAL) ; Rev. 1 (1/12) 36

37 On October 1, 1999, the Social Security Administration (SSA) launched the largest customized mailing ever undertaken by a Federal agency sending annual Social Security Statements to 125 million workers. However, due to the latest budget restrictions, the mailing of statements has been suspended. You can estimate your benefits using the Retirement Calculator at Worth noting... these statements, when being mailed, did NOT take into consideration any offset (WEP or GPO) which was misleading to the recipient. 37

38 Effective May 1 st, 2011, anyone applying for Social Security or Supplemental Security Income benefits will receive payments electronically. All current beneficiaries must switch to electronic payments by March 1 st, For help, go to: 38

39 There are several ways to collect on defaulted student loans. Your tax refund can be seized, and your paycheck can be garnished. In addition, the Debt Collections Improvement Act allows the government to take some Social Security benefits from a student loan borrower in default. Supplemental Security Income is off limits, but Social Security retirement benefits and Social Security disability benefits can be set aside to pay loan debt. Only $9,000 per year, or $750 per month, can be used. However, if the borrower receives less than this amount, taking Social Security benefits is prohibited. Additionally, the amount cannot exceed 15 percent of the borrower's federal benefit. 39

40 The borrower may object to the offset by requesting a review within the time specified by the notice. The borrower may also request a suspension or a modification because of financial hardship. For the review, the borrower will have to provide documentation, such as proof of annual income, proof of the federal benefit, and a financial statement. Lastly, the government and private lenders can sue you. There is no time limit you can be sued indefinitely. Sources: Consequences of a Student Loan Default, Know what to expect if you fall behind on student loan payments. 40

41 Individuals had previously been able to collect Social Security, stop it at any time, pay back the benefit, and then start collecting all over again at a later date when benefits significantly increased. The Social Security Administration issued a new rule effective December 8, 2010, limiting what this had come to be known as the Social Security Do-Over. 41

42 New rules limit... the time period for beneficiaries to withdraw (cancel) an application for retirement benefits to within 12 months of the first month of entitlement, and one withdrawal (cancellation) per lifetime. Also, beneficiaries may voluntarily suspend benefits only for the months beginning after the month in which the request is made. Source: News Release: Social Security Publishes New Rule Revising Withdrawal Policy, Dec 8,

43 Monthly Social Security and Supplemental Security Income (SSI) benefits for more than 60 million Americans increased 3.6% in First increase since Social Security taxes (which fund Medicare) also increased. Based on increase in average wages. Maximum amount of earnings subject to this tax (taxable maximum) increased to $110,100 in 2012 (up from $106,800 in 2011). Of the estimated 161 million workers who will be paying Social Security taxes in 2012, about 10 million will be paying higher taxes as a result of the increase in the taxable maximum. Rev. 1 (1/12) 43

44 The Compassionate Allowances Program... Fast-tracks disability decisions to ensure that Americans with the most serious disabilities receive their benefit decisions within days instead of months or years. With the help of sophisticated new information technology, the Social Security Administration quickly identifies potential Compassionate Allowances and then quickly makes decisions. Program was launched in Thirteen (13) new conditions involving neurological, mental, and immune system disorders were added in December, For more information on the Compassionate Allowances initiative, go to: Rev. 1 (1/12) 44

45 Depends on... What government report you believe... What TV station you tune into... What radio personality gets your attention... What politician you follow... What newspaper you read... One thing for sure... The age to start collecting will continue to increase as life expectancy does as well. 45

46 Advisor: Add information here about you (for example): Name Designation(s) License Number(s) Office Address Tel/Fax Number(s) address Website Etc. 46

47 Don t be fooled into thinking Social Security is a slam-dunk! Schedule a complimentary consultation today to review your personal situation. 47