Securing Your Retirement
Transforming Social Security Into a Winning Retirement Strategy
Living Longer
Life Expectancy Upon Retirement at Age 65
50% chance of living to 87
Male Age 65
25% chance of living to
93
50% chance of living to 89
Female Age 65
25% chance of living to
at least 1 person has a 50% chance of living to
96
93
Couples Age 65
at least 1 person has a 25% chance of living to 98
65
70
75
80
85
90
95
100
Age
A healthy 65-year-old female has a 50% chance of living until age 89 (24 more years).
Source: Society of Actuaries’ Annuity RP-2014 Total Healthy Annuitant rates, Scale MP-2014. Figures assume you are in good health.
2
But Still Collecting Early
Full or
Increased
Benefit
27%
Reduced
Benefit Collected Early
73%
Source: Social Security Administration’s Annual statistical supplement, 2014.
3
Rules of Retirement Benefits
Individual Benefits
Individual Benefits
Best 35 Years
Online Statements or
Retirement Estimator
www.ssa.gov
Source: Social Security Administration (www.ssa.gov).
5
The Tradeoff for Individual Benefits
Full
Retirement
Age
Age
62
Reduced Benefits
Age
70
Increased Benefits
Primary
Insurance
Amount (PIA)
Full Retirement Age (FRA)
65
66
67
1937 or
earlier
1943-1954
1960
and later
Source: Social Security Administration (www.ssa.gov).
6
Collecting Early: The Cost
Cost of Collecting Early
100%
Percentage of FRA Benefits
100%
93%
87%
80%
75%
75%
50%
Collect at Age Collect at Age Collect at Age Collect at Age Collect at Age
62
63
64
65
66 (FRA)
Source: Social Security Administration (www.ssa.gov). Assumes full retirement age of 66.
7
Collecting Early: Consider These Questions
Working
 Are you actually retiring?
 Will you work, even part-time, before FRA?
Longevity
 How is your health?
 Is there a expectation of longevity?
Spouse
 Are you married?
 What is the age difference between spouses?
 Whose benefits can the spouse collect?
8
Collecting Early: Continuing to Work
2016 Retirement Earnings Limit
Your Age
Under FRA
Year reach FRA
Month reach FRA and beyond
2016 limit
What Happens Above the Limit
$15,720/year
$1 of benefits withheld per $2 of
earnings above limit
$41,880/year
$1 of benefits withheld per $3 in
earnings above limit
for months prior to reaching FRA
None
Nothing
Applies to any retirement benefits collected before FRA.
Earnings limit looks at wages only.
Source: Social Security Administration (www.ssa.gov).
9
Changing Your Mind
Source: Social Security Administration (www.ssa.gov).
10
Collecting Late: The Guaranteed Increase
Increases for Collecting Late
Percentage of FRA Benefits
150%
132%
124%
125%
116%
108%
100%
100%
75%
Collect at Age Collect at Age Collect at Age Collect at Age Collect at Age
66 (FRA)
67
68
69
70
Source: Social Security Administration (www.ssa.gov). Assumes full retirement age of 66 and individual born in 1943 or later.
11
A Question of Longevity
Break Even Analysis
Age
82.5
Age
78
60 62
66
70
100%
of PIA
132%
of PIA
80
90
100
Age
75%
of PIA
12
Rules of Retirement Benefits
Spousal and Survivor Benefits
Spousal Benefits - Amount
Jordan
Alex
PIA: $2,200
PIA: $0
Age 62
Jordan
Alex
50% x $2,200
$1,100
FRA
Age 70
Collect - $2,200
Collect Spousal- $1,100
Source: Social Security Administration (www.ssa.gov).
14
Spousal Benefits - Amount
Jordan
Alex
PIA: $2,200
PIA: $0
Age 62
Jordan
Alex
50% x $2,200
$1,100
FRA
Age 70
Collect - $1,650
Collect Spousal- $1,100
Source: Social Security Administration (www.ssa.gov).
15
Spousal Benefits - Reduction
Percentage of FRA Spousal Benefits
Maximum Spousal Benefit Amount
150%
100%
83%
70%
92%
100%
100%
100%
100%
100%
75%
50%
0%
Age 62 Age 63 Age 64 Age 65 Age 66 Age 67 Age 68 Age 69 Age 70
(FRA)
Source: Social Security Administration (www.ssa.gov).
16
Spousal Benefits - Eligibility
Jordan
Alex
PIA: $2,200
PIA: $0
Age 62
FRA
Jordan
Age 70
$2,904
Collects Individual
Benefit Increased 32%
Alex
Collect Spousal- $1,100
Collects Spousal
Benefit (no increase)
Source: Social Security Administration (www.ssa.gov). *If request to suspend is made after April 30th, 2016.
17
Spousal Benefits - Eligibility
Jordan
Alex
PIA: $2,200
PIA: $0
Age 62
Age 70
FRA
Jordan
$1,650
Collects Individual
Benefit Reduced 25%
Alex
$770
Collects Spousal
Benefit Reduced 30%
Source: Social Security Administration (www.ssa.gov). *If request to suspend is made after April 30th, 2016.
18
Spousal Benefits – File & Suspend
Jordan
Alex
PIA: $2,200
PIA: $0
Age 62
Jordan
Age 70
FRA
$0
Files & Suspend
Individual Benefit
Alex
$2,904
Collects Individual
Benefit Increased 32%
Collect Spousal- $1,100
Collects Spousal
Benefit
Source: Social Security Administration (www.ssa.gov). *If request to suspend is made after April 30th, 2016.
19
Suspending Benefits is Still an Option (With New Consequences)
Jordan
Alex
PIA: $2,200
PIA: $0
Age 62
Higher
Earner
FRA
$1,650
Age 70
Suspend Collecting
Individual Benefit*
Collects Individual
Benefit Reduced 25%
Lower
Earner
$770
$2,178
Collects Individual
Benefit Increased 32%
Spousal Benefit
Turned Off*
Collects Spousal
Benefit Reduced 30%
$770
Collects Spousal
Benefit (no increase)
Source: Social Security Administration (www.ssa.gov). *If request to suspend is made after April 30th, 2016.
20
Adding Spousal Benefits to Individual Benefits
Jordan
Alex
PIA: $2,200
PIA: $600
$1,200
$1,100
$1,000
$800
$600
$800
Spousal
$350
$400
$200
Spousal
$500
Spousal
$308
Own
$450
Own
$600
Own
$792
$0
Age 62
Age 66 (FRA)
Age 70
Source: Social Security Administration (www.ssa.gov).
21
Survivor Benefits
Women Are Collecting
Their Husband’s Benefits
Husband's
Benefits
Only
24%
Own and
Husband's
Benefits
28%
Own
Benefits
Only
48%
Jordan
Alex
PIA: $2,200
PIA: $600
Jordan’s Benefits
(63, 6 months)
$1,833
Survivor
Benefits
$1,833
Jordan’s Benefits
(70)
$2,904
Survivor
Benefits
$2,904
Source: Social Security Administration’s Annual statistical supplement, 2014. Assumes full retirement age of 66 and primary insurance amount of $2,200.
22
Collection Strategies
Married Couple – Collect at Age 62
Jordan
Alex
YOB: 1955
PIA: $2,200
Lives through age 75
YOB: 1955
PIA: $600
Lives through age 84
Jordan
Age 62
66 (FRA)
74
70
Collect Individual Benefits - $1,650
Alex
Collect Individual Benefits - $450
Collect Adjusted Spousal Benefits - $350
Jordan’s Benefits
$277,200
Alex’s Benefits
Spousal Benefits
Survivor Benefits
Total
$1,815
x 84 months
= $1,650
$75,600
x 168 months
= $450
$58,800
x 168 months
= $350
$152,460
$196,020
x 168= months
$607,620
24
Married Couple – Collect at Age 66 (FRA)
Jordan
Alex
YOB: 1955
PIA: $2,200
Lives through age 75
YOB: 1955
PIA: $600
Lives through age 84
66 (FRA)
70
Jordan
Age 62
74
Collect Individual Benefits - $2,200
Alex
Collect Individual Benefits - $600
Collect Adjusted Spousal Benefits - $500
Both
BothAge
Age 62
62
Both FRA
$607,620
$607,620
$633,600
25
Married Couple – Collect at Age 70
Jordan
Alex
YOB: 1955
PIA: $2,200
Lives through age 75
YOB: 1955
PIA: $600
Lives through age 84
66 (FRA)
74
70
Jordan
Age 62
$2,904
Alex
$792
$308
Both
BothAge
Age 62
62
Both
Both FRA
FRA
Both Age 70
$607,840
$607,840
$633,600
$633,600
$601,920
26
Married Couple – Large Difference in Benefits
Jordan
Alex
YOB: 1955
PIA: $2,200
Lives through age 75
YOB: 1955
PIA: $600
Lives through age 84
66 (FRA)
74
70
Jordan
Age 62
$2,904
Alex
$450
$500
Both Age 62
Both FRA
Both Age 70
Strategy
$607,620
$633,600
$601,920
$634,320
27
Married Couple – Large Difference in Benefits
Jordan
Alex
YOB: 1955
PIA: $2,200
Lives through age 85
YOB: 1955
PIA: $600
Lives through age 92
66 (FRA)
74
70
Jordan
Age 62
$2,904
Alex
$450
$500
Both Age
Age 62
62
Both
Both FRA
FRA
Both
Both Age
Age 70
70
Both
Strategy
$858,060
$858,060
$976,800
$976,800
$1,012,704
$1,012,704
$1,027,104
28
Restricted Application Still Available if Born 1953 or Earlier
Jordan
Alex
YOB: 1949
PIA: $1,900
Lives through age 85
YOB: 1953
PIA: $1,800
Lives through age 92
70
74
Jordan
66 (FRA)
$2,508
Alex
Age 62
66 (FRA)
70
Collect Spousal - $950
$2,376
Both Age 62
Both FRA
Both Age 70
Strategy
$941,310
$1,052,400
$1,154,736
$1,200,336
29
Widow – Significant Individual Benefits
Chris
PIA: $2,200
Survivor: $2,500
Lives through age 92
Age 60
62
66 (FRA)
70
Survivor Benefits - $1,788
74
$2,904
Age 62
FRA
Age 70
Strategy
$753,300
$810,000
$801,504
$1,016,004
30
Important Notes Regarding Collection Strategies
1. Filing and Suspending
•
•
Voluntary Suspension request made after April 30th, 2016:
•
During suspension, any spousal or dependent child benefit will also be turned off
•
No retroactive payments of suspended benefits
•
The filer won’t be able to claim any other benefit while their benefit is suspended.
Opportunity for those turning 66 on or before September 1st, 2016
2. Restricted Application
• Still available if born on or before January 1st, 1954.
• If born after 1/1/54, deemed filing will apply regardless of age
3. Stay Up-To-Date with Changes
31
Additional Beneficiaries – Divorced Spouse
Spousal Benefits
Survivor Benefits
 Married to ex-spouse for 10+ years
10
 Married to ex-spouse for 10+ years
 Unmarried
Unmarried
 Unmarried or married after age 60
 Both are at least age 62
 At least age 60
 Divorced for at least 2 years*
Unmarried
62
*2 years does not apply if the individual was eligible for spousal benefits at the time of divorce.
Source: Social Security Administration (www.ssa.gov).
32
Taxation of Social Security benefits
Provisional Income =
½ Social Security Benefits + Modified Adjusted Gross Income
Married,
Filing Jointly
$0
Single
$0
0% of Benefits are Taxable
$32,000
$25,000
0-50% of Benefits are Taxable
$44,000
$34,000
7-85% of Benefits are Taxable
Source: Social Security Administration (www.ssa.gov).
33
Next steps
1. Understand the fundamental rules
2. Recognize the options and benefits available
3. Incorporate the collection decision into retirement plans
34
Important Notes
This material is provided for educational purposes only and does not constitute investment advice. The
information contained herein is based on current tax laws, which may change in the future. BlackRock
cannot be held responsible for any direct or incidental loss resulting from applying any of the information
provided in this publication or from any other source mentioned. The information provided in these
materials does not constitute any legal, tax or accounting advice. Please consult with a qualified
professional for this type of advice.
BLACKROCK is a registered trademark of BlackRock, Inc.
NOT FDIC INSURED | MAY LOSE VALUE | NO BANK GUARANTEE
© 2016 BlackRock, Inc.
1/16
USR-7567
3535
Government Pension Offset (GPO)
Your pension could reduce your spousal or survivor benefits
Pension
$1,500
X
2/3
=
Offset
$1,000
Spousal Benefits
Survivor Benefits
$1,100
$2,200
$100
$1,200
37
Windfall Elimination Provision (WEP)
Your pension could reduce your own benefits
Age
22
Age
32
Teacher
PIA =
Age
42
Age
62
LockheedLockheed
Martin
Martin
90%
+
of the first
$856* of AIME
WEP
PIA =
Age
52
90%
40%
32%
+
of the next
$4,301* of AIME
+
of the first
$856* of AIME
32%
of the next
$4,301* of AIME
15%
of AIME over
$5,157*
+
15%
of AIME over
$5,157*
* Changed annually by changes in the national indexing average wage. Numbers for 2015.
Source: Social Security Administration (www.ssa.gov).
38
Widow – Lower Individual Benefits
Chris
PIA: $1,000
Survivor: $2,500
Lives through age 92
Age 60
62
66 (FRA)
Individual - $750
70
72
Collect Survivor Benefits - $2,500
Age 62
FRA
Age 70
Strategy
$753,300
$810,000
$690,000
$846,000
39
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40
Additional Beneficiaries
You or
Your Retirement Age Spouse,
Collecting Benefits
Your Unmarried Child
50% of your PIA*
Your Younger Spouse
50% of your PIA*
 Under age 18 (19 if in high school)
 Caring for your child who is under
age 16 or disabled before age 22
 Any age if disabled before age 22
*Subject to family maximum.
Source: Social Security Administration (www.ssa.gov).
41
Suspending Benefits - Lump Sum Option Eliminated
Jordan
PIA: $2,200
FRA
Age 69
If Request to
Suspend
File and Suspend
$2,200
Benefit is
Asks for Retroactive
Payments
Made After
April 2016
Lump Sum
Equal to three years of suspended payments
~ 79,200
42
Married Couple – Large Difference in Benefits
Jordan
Alex
YOB: 1950
PIA: $2,200
Lives through age 75
YOB: 1950
PIA: $600
Lives through age 85
Jordan
Age 62
66 (FRA)
74
70
Spouse Only Benefit- $300
$2,904
Alex
Collect Individual Benefits - $450
Collect Adjusted Spousal Benefits - $500
Both Age 62
Both FRA
Both Age 70
Strategy
$564,060
$629,400
$580,800
$660,000
$532,224
$636,768
$683,568
43
Married Couple – Large Difference in Benefits
Jordan
Alex
YOB: 1950
PIA: $2,200
Lives through age 85
YOB: 1950
PIA: $600
Lives through age 92
Jordan
Age 62
66 (FRA)
74
70
Spouse Only Benefit- $300
$2,904
Alex
Collect Individual Benefits - $450
Collect Adjusted Spousal Benefits - $500
Both Age 62
Both FRA
Both Age 70
Strategy
$858,060
$976,800
$1,012,704
$1,041,504
44
Suspending Benefits is Still an Option (With New Consequence)
Jordan
Courtney
PIA: $2,200
Ex-Spouse
Age 62
FRA
Age 70
Higher
Earner
$2,904
Collects Individual
Benefit Increased 32%
Ex
$770
Collects Spousal
Benefit Reduced 30%
Source: Social Security Administration (www.ssa.gov).
45
Suspending Benefits is Still an Option (With New Consequence)
Jordan
Courtney
PIA: $2,200
Ex-Spouse
Age 62
FRA
Higher
Earner
Age 70
Files for and Suspends
Individual Benefit
$2,904
Collects Individual
Benefit Increased 32%
Ex
$770
Collects Spousal
Benefit Reduced 30%
Spousal Benefit
Turned Off
$770
Benefit remains
The same
Source: Social Security Administration (www.ssa.gov).
46