Secrets to Maxing Out Your Clients’
Social Security Benefits Under the New Rules
Presented By
Laurence Kotlikoff
Social Security is the Largest or
Second Largest Asset for Most Households
Social Security is Immensely Complex
Making the Right Choices Can Mean Big $$$
To Optimize You Need to Consider All
Social Security Benefits
• Retirement
• Spouse’s
• Divorced Spouse’s
• Child In-Care Spouse’s
• Widow(er)’s
• Divorced Widow(er)’s
• Child’s
• Disabled Child’s
• Surviving Child’s
• Father’s and Mother’s
• Parents’ benefits
• Disability benefits
Precision Software + Expert Customer Support
Is More Critical Than Ever
Need to Consider All Social Security Provisions and All Strategies
• Early Benefit Reductions
• Delayed Retirement Credits
• Recomputation of Benefits
• Earnings Test
• Family Benefit Maximum
• Windfall Elimination Provision
• Government Pension Offset
• Deeming
• Adjustment of Reduction Factor
• RIB LIM (Widow’s limit)
• Alternate Widow(er)’s Benefit
Calculation
• Disability Benefits
• Grandfathering WRT Suspending
• Grandfathering WRT Deeming
New Law
• Eliminates Auxiliary Benefits Given or Received for those
whose retirement benefits are in suspension unless
suspended by/on April 29, 2016
• Extends Deeming From Full Retirement Age Through 70 for
Those Who Turn 62 After January 1, 2016
• Eliminates Option to Recover, in a Lump Sum, Suspended
Benefits for Those Who Don’t Suspend By/On April 29, 2016.
Up to 1.5 Million Boomers Need to Decide
Over the Next Five Months Whether to:
a) File and Suspend or
b) Suspend If They Have Already Filed
Bottom Line
Thanks to the New Law, Highly Precise
Social Security Advice Is Even More Important
Secrets to Social Security Benefit
Maximization Under New Law
Secret #1
The Best Strategy for Most Clients Remains Unchanged –
Wait to Collect As Long As Benefits Are Still Growing
Take a 60 Year-Old High-Earning Couple
Lifetime Benefits If They Both Collect Retirement Benefits At 62
$1.20 Million
Lifetime Benefits If They Optimize Under Old Law
$1.60 Million
Lifetime Benefits If They Optimize Under New Law
$1.55 Million
Secret #2
If You Are Married You May Still Be Able to
Use the File and Suspend Strategy
One Spouse Must Have Been Born Before May 2, 1950 and
the Other Spouse Must Have Been Born Before January 2, 1954.
Secret #3
If You Are Divorced After a 10+ Year Marriage
You May Still Be Able to Collect a Full Spousal Benefit
Divorcees (of 10+ Years of Marriage) Who Were Born Before
January 2, 1954 and Whose Ex is 62+ and
a) the Divorce Occurred Two Or More Years in the Past or
b) Ex Has Filed For His/Her Retirement Benefit
Secret #4
If You Are Married and You and Your Spouse
Are More than Four Years Apart In Age
The Younger Spouse, if Born Before January 2, 1954, Can
Collect a Full Spousal Benefit Starting at Full Retirement Age
The Older Spouse Collects Their Retirement Benefit at 70
Secret #5
If You Are Married and You and Your Spouse
Are Less than Four Years Apart In Age
The Younger Spouse, if Born Before January 2, 1954, Can
Collect a Full Spousal Benefit Starting At or After
Full Retirement Age, Provided the Older Spouse Has Filed
For His/Her Retirement Benefit
Secret #6
If You Are Married, and You and Your Spouse Aren’t
Grandfathered Because You are too Young, and If You Are a
Very Low Earner Compared to Your Younger Spouse, It May Be
Best for Your Younger Spouse to file Somewhat Before 70
to Activate Your Spousal Benefit.
Secret #7
You Can Still Suspend Your Retirement
Benefit No Matter Your Birthdate.
You Just Can’t Provide or Receive Auxiliary Benefits
While Your Retirement Benefit Is In Suspension
If You Aren’t 66 By/On April 29,2016
Secret #8
If You are Single Or Divorced Short of 10 Years, Nothing Has
Changed Expect the Ability to Reclaim Suspended Benefits
If You Haven’t Suspended By/On April 29, 2016.
Secret #9
If You Are Widowed, The New Law Has
No Impact On Your Benefit-Collection Options
Secret #10
The Disabled Weren’t Hurt As Badly the Under New Law
Because They Previously Weren’t Able to Collect Full Spousal
Benefits While Letting their Own Retirement Benefit Grow.
Secret #11
Anyone Who Can’t Suspend By/On April 29th Can’t Collect
Excess Spousal or Excess Divorcee Spousal Benefits or Excess
Widows Benefits or Excess Divorcee Widow’s Benefit, While
Their Retirement Benefit is in Suspension
Secret #12
The New Rules Make Getting Divorced and
Remarrying Much More Profitable for Certain Couples
Example: Two 63 Year Old Spouses. They Can Collect Two
Full Spousal Benefits Starting at 66 If They Get Divorced Before Age 64
Sweating the Details Really Matters
www.maximizemysocialsecurity.com
Tom Dickson, Financial Advisor Channel Leader
Phone: 412.580.5954
E: [email protected]
© 2015 Reverse Mortgage Funding LLC, 1455 Broad St., 2nd Floor, Bloomfield, NJ 07003. NMLS ID # 1019941. These materials are for general information purposes only and are not
for use with individual consumers or for distribution to the general public. The information herein is not intended as legal, tax, or financial planning advice and should not be relied
on or construed as such. This material has not been reviewed, approved, or issued by FHA, HUD, or any government agency.
L217-Exp072016
What is a reverse mortgage?
• Way to convert home equity to a useable resource – a mortgage in
reverse.
• Lender provides benefit based on home equity, payback is optional.
• 99% are Insured by FHA: Home Equity Conversion Mortgage (HECM)
•
•
•
Non-recourse protection
Guaranteed funds, as long as borrower meets their obligations
Line of Credit growth
© 2015 Reverse Mortgage Funding LLC. NMLS ID # 1019941. NOT FOR FURTHER DISTRIBUTION
24
FHA-insured HECM Program
• One of clients on title must be 62 years old.
• Must be primary home and currently lived in.
• Available for single-family property, HUD-approved condo, or up
to 4-unit home. (HECM for Purchase not available on multi-unit
properties.)
• Proceeds can be used to purchase 2nd home or other property.
• Can be used to pay off first mortgage or HELOC.*
• A HECM cannot be called or canceled, as long as the terms of the
loan are met.
• Clients downsizing can use a HECM to finance part of purchase.
*Borrower is responsible for property taxes, homeowners insurance, and property maintenance. A HECM is home-secured debt payable upon default or a maturity event.
© 2015 Reverse Mortgage Funding LLC. NMLS ID # 1019941. NOT FOR FURTHER DISTRIBUTION
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BIG NEWS for clients age 62 or older:
Guaranteed Income for $125 Initial Cost
$665,640
Our low-cost HECM option eliminates nearly all
closing costs, and provides tax-free* cash.
•
•
•
•
In this example: Provides $1,849 per month
for as long as the client lives in the home
Up-front cost: Approximately $125 for
independent HECM counseling
$420 annual servicing fee
This low-cost pricing may not be
available in all states, including FL & MD
$443,760
$221,880
10
years
20
years
30
years
*Consult a tax professional.
The estimates shown are based on a PA property and the HECM Arm Annual as of March 31, 2015. Assumptions include a home value of
$625,500 and a 62-year-old borrower. The initial interest rate is 3.702%, expected interest rate of 5.03% tied to one year LIBOR with a
margin of 3.0%. In this example, closing cost include an origination fee of $0, third-party closing costs of $5,176 depending on appraised
value, and an up-front FHA Mortgage Insurance Premium of $3,127 depending on appraised value. The information being displayed is for
illustrative purposes only. Interest rates and funds available may change daily without notice. Please call 800-214-1265 or visit
reversefunding.com for details about credit costs and terms.
© 2015 Reverse Mortgage Funding LLC. NMLS ID # 1019941. NOT FOR FURTHER DISTRIBUTION
26
Example: HECM line of credit (LOC) growth
62-year-old client with $625,500 home in PA
$125 Initial Cost (48 states)
$866,255
NOTEWORTHY:
Line of credit is
still in-force if one
borrowing spouse
pre-deceases the
other.
$528,476
$322,407
Inception
Credit Line
Year 10
Year 20
© 2015 Reverse Mortgage Funding LLC. NMLS ID # 1019941. NOT FOR FURTHER DISTRIBUTION
27
HECM LOC vs. traditional
Home Equity Line of Credit (HELOC)
HELOC
HECM LOC
Line growth? 1
No
Yes
Cancelable? 2
Yes
No
Requires monthly repayment? 3
Yes
No
None
Age 62+
Age restriction?
1 The
2 As
unused line of credit grows, making more funds available over time.
long as the terms of the loan are met, a HECM line of credit cannot be canceled or reduced by the lender.
3 Borrower
is responsible for property taxes, homeowners insurance, and property maintenance. A HECM is home-secured debt
payable upon default or a maturity event.
© 2015 Reverse Mortgage Funding LLC. NMLS ID # 1019941. NOT FOR FURTHER DISTRIBUTION
28
Example: Term Payment + Credit Line
62-year-old client with $625,500 home in PA
NOTEWORTHY:
One-time total
cost of this HECM
LOC is $428
70-year-old Purchases a Home
Planning Opportunity
Typical Scenario:
Step 1: Clients Sell $500,000
Home
Alternative with HECM Purchase:
Step 1: Clients Sell $500,000
Home
Step 2: Clients Buy $400,000
Home
with ALL Cash
Step 2: Clients Buy $400,000
Home
with $191,477 Cash and finance
$208,523 with HECM Purchase
(no payments required)
Client Cash: $100,000
Client Cash: $308,523
30
HECM for Purchase — for “Right-Sizing”
Lesser of Purchase Price or Appraised Value
$325,000
$400,000
$450,000
Funds From Borrower*
AGE
62
$350,000
$167,809
$180,546
$206,022
$231,498
70
$155,460
$167,246
$190,822
$214,398
75
$147,335
$158,496
$180,822
$203,148
80
$140,510
$151,146
$172,422
$193,698
*Balance would be provided by
HECM Purchase. Estimates are
based on a property in NJ on
3/31/15, and a HECM 5.06
Fixed with full disbursement.
Closing cost estimates from
$13,759 to $18,197.
The information being
displayed is for illustrative
purposes only. Interest rates
and funds available may
change daily without notice.
Please call 800-214-1265 or
visit reversefunding.com for
details about credit costs and
terms.
© 2015 Reverse Mortgage Funding LLC. NMLS ID # 1019941. NOT FOR FURTHER DISTRIBUTION
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Refi + “Cash Out” for Maximum Cash Flow Strategy
10-12%
Withdrawal Rate
Current:
$1,500 Monthly
Payment
After:
No P&I + $1,500
Monthly Cash Out For
$3,000 Positive Change
Current: 66-year-old client with $600,000 home in VA and $1,500 monthly mortgage payment on $90,000 mortgage.
After: Client refinances with HECM to (1) eliminate $1,500 monthly mortgage payment and
(2) draw $1,500 monthly payment or “cash out.”
NET: Positive cash flow change of $3,000 per month ++ clients reduced withdrawal rate from savings from 10% to 4%
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Questions
HECM Product Questions and Quote Requests:
Tom Dickson
Leader of RMF Financial Advisor Channel
P: (412) 580-5954
E: [email protected]
Social Security Questions:
www.MaximizeMySocialSecurity.com
www.economicsecurityplanning.com
© 2015 Reverse Mortgage Funding LLC. NMLS ID # 1019941. NOT FOR FURTHER DISTRIBUTION
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