2018 UPDATED EDITION: Social Security Cheat Sheet

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1 2018 UPDATED EDITION: Social Security Cheat Sheet Visit Us Online:

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3 At Retirement You, we believe in Motivation Through Education. Because knowledge is power, but only if you use it.

4 Important Disclosures & Terms of Use Retirement You was created and is owned by A4 Digital ( A4 ) for exclusive use by Magellan Financial & Insurance Services, Inc. ( Magellan ). Magellan, A4 and its representatives do not provide tax, legal, compliance or other advice and do not review materials for completeness or compliance with state or federal laws or regulations, or the rules and regulations of any regulatory body. The user assumes all risk, regulatory or otherwise, associated with the creation, content, use or distribution of the materials described. Please note that some of the information included was provided by third parties and have been obtained from sources believed to be reliable, but results, accuracy and completeness cannot be guaranteed. It is given for informational purposes only and is not a solicitation to buy or sell any specific financial product. The information is not intended to be used as the sole basis for making financial decisions, nor should it be construed as advice designed to meet the particular needs of an individual s situation. Financial professionals should ensure they continue to follow the current policies on the use of any advertising, third-party materials, web tools and social media as required by their Broker/Dealer and the carriers that they represent. Any information provided from Magellan and A4 through Retirement You is not intended to be all encompassing and does not constitute specific legal, subject matter, or compliance advice. Materials are intended to be used as is and should not be modified or altered. Financial professionals should always follow the applicable state requirements and approval requirements of the carriers they represent, their broker/dealer and registered investment adviser, if applicable. You are encouraged to consult your financial advisor, tax professional and/or attorney prior to making any financial decisions. Copyright Retirement You by A4 Digital. For informational purposes only, not affiliated or endorsed by Social Security Administration, Internal Revenue Service or any government agency. RY

5 Fact Sheet SOCIAL SECURITY 2018 SOCIAL SECURITY CHANGES Cost-of-Living Adjustment (COLA): Based on the increase in the Consumer Price Index (CPI-W) from the third quarter of 2016 through the third quarter of 2017, Social Security and Supplemental Security Income (SSI) beneficiaries will receive a 2.0 percent COLA for Other important 2018 Social Security information is as follows: Tax Rate Employee Self-Employed % 15.30% % 15.30% NOTE: The 7.65% tax rate is the combined rate for Social Security and Medicare. The Social Security portion (OASDI) is 6.20% on earnings up to the applicable taxable maximum amount (see below). The Medicare portion (HI) is 1.45% on all earnings. Also, as of January 2013, individuals with earned income of more than $200,000 ($250,000 for married couples filing jointly) pay an additional 0.9 percent in Medicare taxes. The tax rates shown above do not include the 0.9 percent Maximum Taxable Earnings Social Security (OASDI only) $127,200 $128,700 Medicare (HI only) No Limit Quarter of Coverage $1,300 $1,320 Retirement Earnings Test Exempt Amounts $16,920/yr. $17,040/yr. Under full retirement age ($1,410/mo.) ($1,420/mo.) NOTE: One dollar in benefits will be withheld for every $2 in earnings above the limit. The year an individual reaches full $44,880/yr. $45,360/yr. retirement age ($3,740/mo.) ($3,780/mo.) NOTE: Applies only to earnings for months prior to attaining full retirement age. One dollar in benefits will be withheld for every $3 in earnings above the limit. Social Security National Press Office Baltimore, MD Visit Us Online:

6 Fact Sheet SOCIAL SECURITY 2018 SOCIAL SECURITY CHANGES Cost-of-Living Adjustment (COLA): Based on the increase in the Consumer Price Index (CPI-W) from the third quarter of 2016 through the third quarter of 2017, Social Security and Supplemental Security Income (SSI) beneficiaries will receive a 2.0 percent COLA for Other important 2018 Social Security information is as follows: Tax Rate Employee Self-Employed % 15.30% % 15.30% NOTE: The 7.65% tax rate is the combined rate for Social Security and Medicare. The Social Security portion (OASDI) is 6.20% on earnings up to the applicable taxable maximum amount (see below). The Medicare portion (HI) is 1.45% on all earnings. Also, as of January 2013, individuals with earned income of more than $200,000 ($250,000 for married couples filing jointly) pay an additional 0.9 percent in Medicare taxes. The tax rates shown above do not include the 0.9 percent Maximum Taxable Earnings Social Security (OASDI only) $127,200 $128,700 Medicare (HI only) No Limit Quarter of Coverage $1,300 $1,320 Retirement Earnings Test Exempt Amounts $16,920/yr. $17,040/yr. Under full retirement age ($1,410/mo.) ($1,420/mo.) NOTE: One dollar in benefits will be withheld for every $2 in earnings above the limit. The year an individual reaches full $44,880/yr. $45,360/yr. retirement age ($3,740/mo.) ($3,780/mo.) NOTE: Applies only to earnings for months prior to attaining full retirement age. One dollar in SSA benefits be withheld every $3 in earnings above Source: 2018 Factwill Sheet. Social for Security Administration. thehttps:// limit. Last Accessed July 10, Social Security National Press Office Copyright Baltimore, MD Retirement You by A4 Digital. For informational purposes only, not affiliated or endorsed by Social Security Administration, Internal Revenue Service or any government agency. RY

7 2018 UPDATED EDITION: Social Security Cheat Sheet 2015 Bipartisan Budget Act Changes Annual Trustees Financial Summary Each year, the Social Security and Medicare Board of Trustees is required to release a detailed report about the financial condition of each program. Here are some key financial figures from the 2018 report. The full summary can be found at: (last accessed July 10, 2018). Visit Us Online:

8 Qualifying for Social Security Benefits To become eligible for Social Security, you need a minimum of 6 Quarters of Coverage (QC) and at least 1 QC each year after age 21. After reaching 40 QC s, you become eligible for individual retirement benefits based on your top 35 wage adjusted earnings years. The QC increased from $1,300 to $1,320 for 2018, an increase of 1.5%. In the last 20 years, the QC has increased over 78% from $740 in No more than 4 QC s can be attained in each year, regardless of earnings. Married and Divorced Spouses (married 10 consecutive years) are eligible for spousal benefits (subject to certain criteria) even if they don t meet qualifications for individual benefits. Source: Quarter of Coverage. Social Security Administration. Last Accessed July 10, Copyright Retirement You by A4 Digital. For informational purposes only, not affiliated or endorsed by Social Security Administration, Internal Revenue Service or any government agency. RY

9 2018 UPDATED EDITION: Social Security Cheat Sheet 2015 Bipartisan Budget Act Changes Calculating Your Monthly Benefit Amount The formula is used by Social Security Administration to adjust prior year earnings based on the Average Wage Index (AWI) to determine Average Indexed Monthly Earnings (AIME). From AIME, 3 Bend Points are applied to determine the Primary Insurance Amount (PIA), which is the basis for starting Social Security benefit calculations. These bend points change each year unless the AWI is flat or negative. For 2018, the formula starts with AIME and applies 90% of the first $896, plus 32% of the next $4,503, plus 15% of any additional amount (subject to the maximum taxable wages for each contribution year). The amounts below provide estimates based on hypothetical income amounts only and do not include calculations for future value or COLA. Benefits may be reduced based on a number of factors, including filing age, government pensions and actual work history. Estimated Monthly Benefits Based on Filing Age & AIME $50,000 Avg. Annual Income $75,000 Avg. Annual Income $100,000 Avg. Annual Income IF AGE 62 $1,389/mo. IF AGE 66 $1,853/mo. IF AGE 70 $2,446/mo. IF AGE 62 $1,781/mo. IF AGE 66 $2,375/mo. IF AGE 70 $3,135/mo. IF AGE 62 $2,015/mo. IF AGE 66 $2,687/mo. IF AGE 70 $3,547/mo. Visit Us Online:

10 History of PIA Formula Bend Points Source: Benefit Formula Bend Points. Social Security Administration. Last Accessed July 10, Copyright Retirement You by A4 Digital. For informational purposes only, not affiliated or endorsed by Social Security Administration, Internal Revenue Service or any government agency. RY

11 2018 UPDATED EDITION: Social Security Cheat Sheet 2015 Bipartisan Budget Act Changes Cost of Living Adjustments (COLA) In 1972, Congress enacted the COLA provision, requiring a measure of inflation to determine the annual increases in Social Security benefits. Automatic COLA s began in Currently, the measure used is the CPI-W, which is calculated by the Bureau of Labor Statistics based on the Consumer Price Index for Urban Wage Earners and Clerical Workers. The COLA for 2018 is 2%, meaning someone who is collecting $2,000/mo. will now receive $2,040/mo. COLA was only 0.3% in 2017 and 0% in Average COLA Rates Since % Last 20 Years 2.12% Last 10 Years 1.66% Source: COLA Information for Social Security Administration. Last Accessed July 10, Visit Us Online:

12 2015 Bipartisan Budget Act Summary Signed into law in November of 2015, the Bipartisan Budget Act of 2015 made the most significant changes to Social Security in over 10 years. In an effort to fund the government and close so-called Social Security Loopholes, the controversial measure passed the House by a vote of 266 to 167 and the Senate by a vote of 64 to 35. Summary of Important Changes: Suspended Debt Ceiling and Spending Caps Until 2017 Transferred $150 Billion from the Social Security Retirement Trust (OASI) to the Social Security Disability Trust (DI) Phased Out Popular Social Security Filing Strategies Voluntary Suspension Eliminated After 180 Days Restricted Application Eliminated After 4 Years Additional Details on the Next Page Retirement Income Starts With Social Security: Social Security can be a confusing topic for retirees, but provides a significant source of retirement income and you only get one chance to get it right. Understanding all the available filing options and how the latest changes impact your options is the first step towards choosing the right filing age. After all, Social Security is funded with your tax dollars, so doesn t it make sense to get the most benefits possible? Source: Congress Passes H.R. 1314, the Bipartisan Budget Act of Social Security Administration. Last Accessed July 10, Copyright Retirement You by A4 Digital. For informational purposes only, not affiliated or endorsed by Social Security Administration, Internal Revenue Service or any government agency. RY

13 2018 UPDATED EDITION: Social Security Cheat Sheet 2015 Bipartisan Budget Act Changes 2015 Bipartisan Budget Act Changes Elimination of the Voluntary Suspension This strategy, commonly referred to as File & Suspend, was seen as a loophole allowing higher income earning couples to receive additional benefits by collecting spousal benefits without collecting individual benefits. As of April 30, 2016, voluntary suspension was eliminated for all new filers. Changes to the Restricted Application This strategy involves electing a spousal benefit and still allowing your individual to continue to accrue delayed retirement credits. Qualifying married and divorced filers that are eligible for an individual benefit and a spousal benefit restrict filing to only the spousal benefit at Full Retirement Age (FRA) until a maximum of age 70, while still accumulating 8% per year delayed retirement credits for their individual benefit. As a result of the budget act, this strategy is phased out based on current age. For filers who are age 62 or older as of the end of 2015, the strategy will be available and remain unchanged. For those turning 62 after January 1, 2016, the strategy will no longer be available. Important Notes & Additional Information As of the writing of this publication, these changes impact individual and spousal benefits only, and do not include widow(er) benefits. The statements above represent a summary of the changes and do not include all filers. Always confirm the availability of filing strategies based on your age and specific situation prior to making a filing decision. *The article is not intended to be tax or legal advice. Clients should seek guidance from the Social Security Administration regarding their particular situation. Social Security payout rates can and will change at the sole discretion of the Social Security Administration. For more information, please contact your local Social Security Administrative office, or visit Visit Us Online:

14 Calculating Social Security Taxes Current Social Security taxes total 12.4%, with 6.2% paid by the employee and employer through matching payroll taxes. The tax rate remains unchanged from If you are self employed, both portions are paid in the form of Self Employment Tax (Schedule SE). For 2018, the maximum earnings subject to Social Security taxes will increase from $127,200 to $128,400. The increase means that for the 2018 tax year, the maximum Social Security payroll tax paid per individual is $7,960 for both the employee and employer. Source: Benefits Planner: Maximum Taxable Earnings. Social Security Administration. Last Accessed July 10, Copyright Retirement You by A4 Digital. For informational purposes only, not affiliated or endorsed by Social Security Administration, Internal Revenue Service or any government agency. RY

15 2018 UPDATED EDITION: Social Security Cheat Sheet 2015 Bipartisan Budget Act Changes Collecting Benefits While Still Working If you are planning to work and collect Social Security benefits, it is important to know the 2018 earnings limit that applies both before and during the year you reach Full Retirement Age (FRA). Prior to FRA, If you earn over $17,040 (up from $16,920), $1 in benefits will be deducted for every $2 in earnings. During the year you reach FRA, the limit increases to $45,360 (up from $44,880) and $1 in benefits is deducted for every $3 in earnings. The amount is calculated monthly and based on individual earnings, even if you are married filing jointly. Earnings after you turn FRA (Age 66-67) do not count against you. Earned income only includes earnings from your job and not additional income such as pension payments, retirement account distributions or interest income. Social Security taxes, income taxes and additional penalties may also apply in addition to any assessed work penalty. Example #1: Under FRA Example #2: Turning FRA Under&Full&Retirement&Age&(FRA) Assumed2Age264 Turning&Full&Retirement&Age&(FRA) Assumed2Age266 Earned'Income'=' $60,000 Earned'Income'=' $60,000 Earnings'Test'=' $17,040 Earnings'Test'=' $45,360 PENALTY'BASIS'=' $42,960 PENALTY'BASIS'=' $14,640 Social&Security&Work&Penalty $21,480 Social&Security&Work&Penalty $4,880 Visit Us Online:

16 Income Taxes on Social Security Benefits Social Security benefits are funded using current payroll taxes and then used for income in retirement, similar to a company pension plan or annuity contract. Starting in 1984, all current recipients are subject to income limitations, based on modified adjusted gross income (MAGI), before benefits are subject to federal income taxes. When collecting benefits, up to 85% of benefits may be taxable based on your total MAGI. MAGI includes income from most sources, including W-2 earnings, 1099 earnings, taxable distributions from traditional retirement accounts (IRA/401k) and even some government bonds that are typically nontaxable. Here are the current income limits and effective percentage of benefits that become taxable. Source: Income Taxes on Social Security Benefits. Social Security Administration. Last Accessed July 10, Copyright Retirement You by A4 Digital. For informational purposes only, not affiliated or endorsed by Social Security Administration, Internal Revenue Service or any government agency. RY

17 2018 UPDATED EDITION: Social Security Cheat Sheet 2015 Bipartisan Budget Act Changes Benefit Reductions For Government Pensions Government Pension Offset (GPO) The Government Pension Offset can affect some or all of your spousal and survivor benefits entitlement if you are collecting a government pension based on earnings that were not subject to Social Security taxes. This offset will reduce the amount of your benefit by 2/3 the amount of your pension. For example, if you are a civil service employee and have a $600/mo. pension, the reduction of spousal benefit will be $400/mo. There are exemptions for some civil service or federal employees who paid Social Security taxes on pension eligible wages. To access the SSA.gov GPO Calculator, visit: Windfall Elimination Provision (WEP) The Windfall Elimination Provision can affect how much Social Security retirement and/or disability benefit you receive based on the number of years of substantial earnings you have on your individual record and whether or not you had earnings that were not subject to Social Security taxes. The amount of the reduction could be up to 50% of the first Bend Point based on the number of years you paid into Social Security and could reduce your benefit by as much as $448/mo. in To qualify for individual benefits, even if reduced due to government pension(s), you still need at least 10 quarters of coverage (QC). To access the SSA.gov WEP Calculator, visit: Visit Us Online:

18 Thank You From Our Founder, Alex Stanchfield It is my sincere hope that you gained valuable knowledge about the changes to Social Security for 2018 and this guide will help take control of your financial future. It can be intimidating to plan for and execute a successful retirement income strategy, which is why we truly believe in our mission of Motivation Through Education. The catch is, educational information only provides value if it inspires you to take action. With all the changes unexpected events in the last few years, doesn t it make sense to make sure you are still on track for a successful retirement? Here s how to get started. First, consider attending one of our nationwide Retirement You training workshops that are hosted by some of the top financial professionals in the industry. We send invitations through Facebook, so keep an eye on your newsfeed. The hosts are local members of your community and take their role in helping you find the best retirement strategy seriously. If you can t find a local live workshop, I host online trainings every month and you can sign up at our homepage: Thank you for trusting Retirement You, Alexander L. Stanchfield Founder of Retirement You Copyright Retirement You by A4 Digital. For informational purposes only, not affiliated or endorsed by Social Security Administration, Internal Revenue Service or any government agency. RY

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