sss webinar 01 weak ss knowledge slides
2/20/2014
Why Weak Social Security Knowledge Will Cost You
© 2014 Social Security Timing®. All Rights Reserved.
The Presenter and Social Security Timing® are not connected with or endorsed by United States government or the Social Security Administration.
The Social Security Timing® website, software and training materials are not endorsed or affiliated with the SSA.
© 2014 Social Security Timing®. All Rights Reserved.
1
2/20/2014
Our Focus Today • Recent Research • Client Value - Case Study • What is good Strategy? • Overview of future webinars • Follow up materials
© 2014 Social Security Timing®. All Rights Reserved.
Recent Research • 2012 Study by Study Alice Henriques, Board of Governors for the Federal Reserve • Sample contained 13,753 men born between 1922 and 1940 • Most couples do not maximize Social Security Value to the household
© 2014 Social Security Timing®. All Rights Reserved.
Source: http://www.federalreserve.gov/pubs/feds/2012/201219/index.html
2
2/20/2014
Claiming Patterns Empirical Distribution of Claiming Age by Marital Status at Claiming, Males
© 2014 Social Security Timing®. All Rights Reserved.
Source: http://www.federalreserve.gov/pubs/feds/2012/201219/index.html
Lost Benefits Distribution of Total Household Benefits Lost: Maximum OASI Benefits Less Actual Expected Benefits
About 20% of couples lose a total of at least $5,000 and about 5% lose at least $20,000 © 2014 Social Security Timing®. All Rights Reserved.
Source: http://www.federalreserve.gov/pubs/feds/2012/201219/index.html
3
2/20/2014
Conclusions? • Most families do not maximize benefits • “…[H]usbands are very responsive to their own benefit incentives, but they are not responsive to the incentives created by dependent benefits.”
© 2014 Social Security Timing®. All Rights Reserved.
Source: http://www.federalreserve.gov/pubs/feds/2012/201219/index.html
Your Clients are Different • Higher Delayed Retirement Credits – 8% rather than 6.5% or less • Higher wage earners • Higher life expectancies • Dual income households • Study did not account for: – Restricted application – Voluntary Suspension © 2014 Social Security Timing®. All Rights Reserved.
Source: http://www.federalreserve.gov/pubs/feds/2012/201219/index.html
4
2/20/2014
What we see • • • •
Over 100,000 reports run in 2013 Average age difference 3 years Average age of male, 62 and female 59 We regularly see a difference of over $150,000 between Early and Suggested strategies.
© 2014 Social Security Timing®. All Rights Reserved.
A Core Message This is not your Parent’s Social Security Decision. The rules are different and the impacts are much bigger!
© 2014 Social Security Timing®. All Rights Reserved.
5
2/20/2014
Social Security Matters
© 2014 Social Security Timing®. All Rights Reserved.
Interest is Increasing
© 2014 Social Security Timing®. All Rights Reserved.
6
2/20/2014
We haven’t made a dent
© 2014 Social Security Timing®. All Rights Reserved.
The Takeaway • Today’s adopters are still “Early Adopters” • Middle adopters may not lose much ground, but are also unlikely to gain • Late adopters will lose clients
Do you want a sword or a shield?
© 2014 Social Security Timing®. All Rights Reserved.
7
2/20/2014
What Makes Social Security Unique? • Inflation Adjusted • Longevity Protected • Tax Advantaged • Backed by a Government Promise • 40% “cheaper” than commercial annuities* http://www.forbes.com/2008/02/07/retirement-roth-taxes-pf-guru-in_jn_0207retirement_inl.html © 2014 Social Security Timing®. All Rights Reserved.
A Typical Case • Clients 62 and 60 • His age 62 Benefit: $1,875/month • Her age 62 Benefit: $1,125/month • Starting Retirement With $850,000 in IRA Assets • 6% annual return and 3% inflation • Needing $70,000 per year in inflation adjusted after-tax income • Living to 85 and 90 © 2014 Social Security Timing®. All Rights Reserved.
8
2/20/2014
What’s At Stake? Strategy Comparison
Suggested - $1,018,857
$191,692
Earliest - $827,165
$0
$300,000
$600,000
$900,000
$1,200,000
© 2014 Social Security Timing®. All Rights Reserved.
Cashflow for Early Cashflow Early $180,000 $160,000 $140,000 $120,000 $100,000 $80,000 $60,000 $40,000 $20,000 $0 2013
2018
2023
Early Social Security Total Income Need
2028
2033
2038
2043
Early 401k Withdrawal
© 2014 Social Security Timing®. All Rights Reserved.
9
2/20/2014
Cashflow for Optimized Cashflow Optimized $180,000 $160,000 $140,000 $120,000 $100,000 $80,000 $60,000 $40,000 $20,000 $0
2013
2018
2023
Optimized Social Security Total Income Need
2028
2033
2038
2043
Optimized 401k withdrawal
© 2014 Social Security Timing®. All Rights Reserved.
Portfolio Drawdown Comparison Comparing IRA Balances $900,000 $800,000 $700,000 $600,000 $500,000 $400,000 $300,000 $200,000 $100,000 $0
2013
2018
2023
Early IRA Balance
2028
2033
2038
2043
Optimized IRA Balance
© 2014 Social Security Timing®. All Rights Reserved.
10
2/20/2014
Federal Tax Comparison Federal Tax Comparison $14,000.00 $12,000.00 $10,000.00 $8,000.00 $6,000.00 $4,000.00 $2,000.00 $0.00
2013
2018
2023
Early Federal Tax
2028
2033
2038
2043
Optimized Federal Tax
© 2014 Social Security Timing®. All Rights Reserved.
The Impact • $191,000 of additional Social Security Value • 8 years of Additional Portfolio Longevity • Much higher Inflation adjusted “floor” • Roughly $40,000 less in taxes - even with additional years of Portfolio Longevity
© 2014 Social Security Timing®. All Rights Reserved.
11
2/20/2014
3 Major Categories of Benefits Your Retirement Benefit
Your Spousal Benefit (up to 50% of your spouse’s retirement benefit PIA)
A Survivor Benefit (up to the higher of your own or the deceased’s benefit)
Good Strategy makes the most of all 3! © 2014 Social Security Timing®. All Rights Reserved.
Switch Strategies® may get you more • Married Couples – Claim your own, then add spousal – Claim your Spousal, then switch to your own • Divorced Individuals – Same options, but ex’s actions are irrelevant (Independently Entitled) • Widows – Claim Widow, then Retirement – Claim Retirement, then Widow © 2014 Social Security Timing®. All Rights Reserved.
12
2/20/2014
Planning for the Survivor is Critical! • Survivor generally receive higher of his or her own benefit or the benefit of the deceased • 98% of Widow Benefit recipients are Women(1) • 80% of women survive their husbands on average for 14 years(2) (1)http://www.socialsecurity.gov/policy/docs/ssb/v70n3/v70n3p89.html (2)http://www.marketwatch.com/story/ten-ways-husbands-can-help-their-wives-survive-widowhood © 2014 Social Security Timing®. All Rights Reserved.
Caution: You may need special filing • Voluntary Suspension • Restricted Application
© 2014 Social Security Timing®. All Rights Reserved.
13
2/20/2014
Benefits are Taxed Differently
Provisional Income 50% of Social Security Benefit
Ordinary Income
Dividends and Capital Gains
NonTaxable Interest
© 2014 Social Security Timing®. All Rights Reserved.
Benefits Tax Thresholds
Single
• $25,000 (50%) • $34,000 (85%)
Married Filing Jointly
• $32,000 (50%) • $44,000 (85%)
© 2014 Social Security Timing®. All Rights Reserved.
14
2/20/2014
SNO EPTEMBER A OVEMBER M CTOBER A JUGUST M ARCH UNE PRIL ULY AY 21 16 18 16 19 20 ST 15 TH TH TH 19 17 TH TH TH TH TH
M HE ISCOVER D AXIMIZING ECIPHERING S OCIAL LANNING ECURITY G SELP OCIAL O AND PPORTUNITIES LANNING S M INIMIZING MISTAKE FOR TE HE TOW RUTH ABOUT G OVERNMENT TTTD HE HE TARNINGS S OP OCIAL HHAT 3PS M TO S ISTAKES ECURITY TAINS H EST :P H P P OW TO ARENTS LANNING A CECURITY VOID ONTINUING :WITH TO XPECT ATCH OUR NBOX Y D ISABLED C LIENTS AND T FPAMILIES THAT WTHE ILL C OST Y OU B IG C LIENTS COUR ARRYING TO W ORK M A ESSAGE FFECTS TO ENEFITS THE UBLIC E MPLOYEES ’AND SFOR OCIAL S ECURITY BENEFITS L FOR OSSES D IVORCED W IDOW C LIENT LIENTS S POUSAL U NLOCK THE S C URVIVOR HILD ’B S BHEIR B ENEFIT ENEFITS
WW
Y E I
© 2014 Social Security Timing®. All Rights Reserved.
© 2014 Social Security Timing®. All Rights Reserved.
15
2/20/2014
For advisors use only — not intended for general distribution
16
Why Weak Social Security Knowledge Will Cost You
© 2014 Social Security Timing®. All Rights Reserved.
The Presenter and Social Security Timing® are not connected with or endorsed by United States government or the Social Security Administration.
The Social Security Timing® website, software and training materials are not endorsed or affiliated with the SSA.
© 2014 Social Security Timing®. All Rights Reserved.
1
2/20/2014
Our Focus Today • Recent Research • Client Value - Case Study • What is good Strategy? • Overview of future webinars • Follow up materials
© 2014 Social Security Timing®. All Rights Reserved.
Recent Research • 2012 Study by Study Alice Henriques, Board of Governors for the Federal Reserve • Sample contained 13,753 men born between 1922 and 1940 • Most couples do not maximize Social Security Value to the household
© 2014 Social Security Timing®. All Rights Reserved.
Source: http://www.federalreserve.gov/pubs/feds/2012/201219/index.html
2
2/20/2014
Claiming Patterns Empirical Distribution of Claiming Age by Marital Status at Claiming, Males
© 2014 Social Security Timing®. All Rights Reserved.
Source: http://www.federalreserve.gov/pubs/feds/2012/201219/index.html
Lost Benefits Distribution of Total Household Benefits Lost: Maximum OASI Benefits Less Actual Expected Benefits
About 20% of couples lose a total of at least $5,000 and about 5% lose at least $20,000 © 2014 Social Security Timing®. All Rights Reserved.
Source: http://www.federalreserve.gov/pubs/feds/2012/201219/index.html
3
2/20/2014
Conclusions? • Most families do not maximize benefits • “…[H]usbands are very responsive to their own benefit incentives, but they are not responsive to the incentives created by dependent benefits.”
© 2014 Social Security Timing®. All Rights Reserved.
Source: http://www.federalreserve.gov/pubs/feds/2012/201219/index.html
Your Clients are Different • Higher Delayed Retirement Credits – 8% rather than 6.5% or less • Higher wage earners • Higher life expectancies • Dual income households • Study did not account for: – Restricted application – Voluntary Suspension © 2014 Social Security Timing®. All Rights Reserved.
Source: http://www.federalreserve.gov/pubs/feds/2012/201219/index.html
4
2/20/2014
What we see • • • •
Over 100,000 reports run in 2013 Average age difference 3 years Average age of male, 62 and female 59 We regularly see a difference of over $150,000 between Early and Suggested strategies.
© 2014 Social Security Timing®. All Rights Reserved.
A Core Message This is not your Parent’s Social Security Decision. The rules are different and the impacts are much bigger!
© 2014 Social Security Timing®. All Rights Reserved.
5
2/20/2014
Social Security Matters
© 2014 Social Security Timing®. All Rights Reserved.
Interest is Increasing
© 2014 Social Security Timing®. All Rights Reserved.
6
2/20/2014
We haven’t made a dent
© 2014 Social Security Timing®. All Rights Reserved.
The Takeaway • Today’s adopters are still “Early Adopters” • Middle adopters may not lose much ground, but are also unlikely to gain • Late adopters will lose clients
Do you want a sword or a shield?
© 2014 Social Security Timing®. All Rights Reserved.
7
2/20/2014
What Makes Social Security Unique? • Inflation Adjusted • Longevity Protected • Tax Advantaged • Backed by a Government Promise • 40% “cheaper” than commercial annuities* http://www.forbes.com/2008/02/07/retirement-roth-taxes-pf-guru-in_jn_0207retirement_inl.html © 2014 Social Security Timing®. All Rights Reserved.
A Typical Case • Clients 62 and 60 • His age 62 Benefit: $1,875/month • Her age 62 Benefit: $1,125/month • Starting Retirement With $850,000 in IRA Assets • 6% annual return and 3% inflation • Needing $70,000 per year in inflation adjusted after-tax income • Living to 85 and 90 © 2014 Social Security Timing®. All Rights Reserved.
8
2/20/2014
What’s At Stake? Strategy Comparison
Suggested - $1,018,857
$191,692
Earliest - $827,165
$0
$300,000
$600,000
$900,000
$1,200,000
© 2014 Social Security Timing®. All Rights Reserved.
Cashflow for Early Cashflow Early $180,000 $160,000 $140,000 $120,000 $100,000 $80,000 $60,000 $40,000 $20,000 $0 2013
2018
2023
Early Social Security Total Income Need
2028
2033
2038
2043
Early 401k Withdrawal
© 2014 Social Security Timing®. All Rights Reserved.
9
2/20/2014
Cashflow for Optimized Cashflow Optimized $180,000 $160,000 $140,000 $120,000 $100,000 $80,000 $60,000 $40,000 $20,000 $0
2013
2018
2023
Optimized Social Security Total Income Need
2028
2033
2038
2043
Optimized 401k withdrawal
© 2014 Social Security Timing®. All Rights Reserved.
Portfolio Drawdown Comparison Comparing IRA Balances $900,000 $800,000 $700,000 $600,000 $500,000 $400,000 $300,000 $200,000 $100,000 $0
2013
2018
2023
Early IRA Balance
2028
2033
2038
2043
Optimized IRA Balance
© 2014 Social Security Timing®. All Rights Reserved.
10
2/20/2014
Federal Tax Comparison Federal Tax Comparison $14,000.00 $12,000.00 $10,000.00 $8,000.00 $6,000.00 $4,000.00 $2,000.00 $0.00
2013
2018
2023
Early Federal Tax
2028
2033
2038
2043
Optimized Federal Tax
© 2014 Social Security Timing®. All Rights Reserved.
The Impact • $191,000 of additional Social Security Value • 8 years of Additional Portfolio Longevity • Much higher Inflation adjusted “floor” • Roughly $40,000 less in taxes - even with additional years of Portfolio Longevity
© 2014 Social Security Timing®. All Rights Reserved.
11
2/20/2014
3 Major Categories of Benefits Your Retirement Benefit
Your Spousal Benefit (up to 50% of your spouse’s retirement benefit PIA)
A Survivor Benefit (up to the higher of your own or the deceased’s benefit)
Good Strategy makes the most of all 3! © 2014 Social Security Timing®. All Rights Reserved.
Switch Strategies® may get you more • Married Couples – Claim your own, then add spousal – Claim your Spousal, then switch to your own • Divorced Individuals – Same options, but ex’s actions are irrelevant (Independently Entitled) • Widows – Claim Widow, then Retirement – Claim Retirement, then Widow © 2014 Social Security Timing®. All Rights Reserved.
12
2/20/2014
Planning for the Survivor is Critical! • Survivor generally receive higher of his or her own benefit or the benefit of the deceased • 98% of Widow Benefit recipients are Women(1) • 80% of women survive their husbands on average for 14 years(2) (1)http://www.socialsecurity.gov/policy/docs/ssb/v70n3/v70n3p89.html (2)http://www.marketwatch.com/story/ten-ways-husbands-can-help-their-wives-survive-widowhood © 2014 Social Security Timing®. All Rights Reserved.
Caution: You may need special filing • Voluntary Suspension • Restricted Application
© 2014 Social Security Timing®. All Rights Reserved.
13
2/20/2014
Benefits are Taxed Differently
Provisional Income 50% of Social Security Benefit
Ordinary Income
Dividends and Capital Gains
NonTaxable Interest
© 2014 Social Security Timing®. All Rights Reserved.
Benefits Tax Thresholds
Single
• $25,000 (50%) • $34,000 (85%)
Married Filing Jointly
• $32,000 (50%) • $44,000 (85%)
© 2014 Social Security Timing®. All Rights Reserved.
14
2/20/2014
SNO EPTEMBER A OVEMBER M CTOBER A JUGUST M ARCH UNE PRIL ULY AY 21 16 18 16 19 20 ST 15 TH TH TH 19 17 TH TH TH TH TH
M HE ISCOVER D AXIMIZING ECIPHERING S OCIAL LANNING ECURITY G SELP OCIAL O AND PPORTUNITIES LANNING S M INIMIZING MISTAKE FOR TE HE TOW RUTH ABOUT G OVERNMENT TTTD HE HE TARNINGS S OP OCIAL HHAT 3PS M TO S ISTAKES ECURITY TAINS H EST :P H P P OW TO ARENTS LANNING A CECURITY VOID ONTINUING :WITH TO XPECT ATCH OUR NBOX Y D ISABLED C LIENTS AND T FPAMILIES THAT WTHE ILL C OST Y OU B IG C LIENTS COUR ARRYING TO W ORK M A ESSAGE FFECTS TO ENEFITS THE UBLIC E MPLOYEES ’AND SFOR OCIAL S ECURITY BENEFITS L FOR OSSES D IVORCED W IDOW C LIENT LIENTS S POUSAL U NLOCK THE S C URVIVOR HILD ’B S BHEIR B ENEFIT ENEFITS
WW
Y E I
© 2014 Social Security Timing®. All Rights Reserved.
© 2014 Social Security Timing®. All Rights Reserved.
15
2/20/2014
For advisors use only — not intended for general distribution
16
