Make the Most of
Social Security
Did you know?
1
Average annual Social Security benefit?
$16,398 (men)
$12,520 (women)
2
How many people fail to maximize their
benefits?
73%
3
Maximum monthly benefit in 2015?
4
What percent of women will live past age 90?
25%
5
How much “replacement income” can
highest wage earners expect?
16%
2
$2,663
Source: Social Security Administration. Social Security Fact Sheet. Annual Statistical Supplement to the Social
Security Bulletin. Data through year–end 2012. Income of the Aged Chartbook 2012 (published 2014)
Social Security decisions
are inherently complex
Delayed Retirement Credits Non-covered pension
Survivor Benefits
Windfall Elimination Provision
FRA
WEP-PIA “2/3% per month for up to 48 months” Disability Benefits
“5/9% for up to 36 months, plus 5/12% for the next 12 months”
“People born on January 1 of any year should refer to the
previous year to determine their FRA.”
Primary Insurance Amount
Retirement Benefits
3
Claim and suspend
“…benefits will be reduced by $1 for every $2 you earn over the
annual limit, or $1 for every $3 you earn after FRA.”
Taxes may be owed on
up to 85% of your benefits
Divorced Benefits
Earnings Record
Government Pension Offset
Delay Strategy
For illustrative purposes only. All statements and quotes are from SSA.gov.
PIA
“…If you remarry before age 60…”
“…If you were married for 10 years…”
“…If you work less than 35 years…”
Let’s talk about Social Security
• The basics
• Calculating your benefit
• It’s not just when you claim – how you claim also matters
• Tips before you claim
• Steps you can take
• Q&A
4
The Basics
5
Isn’t it my money?
Payroll Taxes
Claim your
6.2%
(You)
benefit,
+
6.2%
not your
contribution into
the fund
(Employer)
During
Work Years
6
Current Social Security tax for 2014, 2015.
Current
Workforce
Money Pool
In Retirement
Will Social Security be there?
7
Source: Social Security, Special Collections.
Social Security is a critical component
of your retirement income plan
A detailed plan that can help you
determine how to use your
financial resources to
generate income to last the rest
of your life.
8
Social Security income is best used
to cover essential expenses
Hard to beat
its combination of:
• Monthly income
• Longevity protection
• Spousal coverage
• Cost-of-living adjustments
(COLAs)
9
For illustrative purposes only.
Essential
Expenses
• Housing
• Food
• Health care
Discretionary
Expenses
Get to know www.SSA.gov
10
Home page of the Social Security Web site on 11/3/2014.
Determining your Full
Retirement Age (FRA)
You are eligible for
full Social Security
benefits when you
reach your FRA
Unless you have a
January 1 birthday!
11
Source: Social Security Administration.
Year you
were born
Your full
retirement age
1937 or earlier
65
1938
65 and 2 months
1939
65 and 4 months
1940
65 and 6 months
1941
65 and 8 months
1942
65 and 10 months
1943–1954
66
1955
66 and 2 months
1956
66 and 4 months
1957
66 and 6 months
1958
66 and 8 months
1959
66 and 10 months
1960 or later
67
Why your FRA is so important
Your benefit is
It is the age you must
calculated at FRA,
reach to be eligible to
then adjusted up or
receive full benefits
down based on when
you claim
12
Source: Social Security Administration.
Benefits are
permitted for full
months only –
not partial months
How you qualify
for retirement benefits
Each worker needs: 40 “credits” to qualify
• One credit = $1,220 in FICA wages/earnings (for 2015)
• Can only earn up to 4 credits per year
Qualification is based on one or more work records:
• Your own individual work record
• Your current spouse’s work record
• An ex-spouse’s work record
• A deceased spouse’s work record
13
Social Security How You Earn Credits, 2015.
Spousal benefits
As a spouse, you may receive “Spousal” retirement
benefits
• At your FRA, up to 50% of your spouse’s FRA benefit amount
• Reduced amount if claiming early
• A combination of your benefit and a portion of your spousal
benefit
• Apply for your spousal benefit at FRA, then switch to your work
record benefit at age 70
14
Social Security How You Earn Credits, 2015.
When to claim?
Generally, the later, the better
Permanent reduction
if claiming before FRA
Age 60
Earliest age
for surviving
spouse
benefits
Age 62
Age 65
Earliest age
to claim
Medicare
eligibility
Lock in 25%–30%
reduction
Can reduce
surviving spouse benefit
15
Source: Social Security Administration.
Delayed
retirement credits
FRA
Age 66–67
Age 70
Full
Retirement Age
Maximum
benefit
Full Social
Maximum
Security benefit
surviving spouse
available
benefits
When you claim Social Security can
have a significant impact on your portfolio
It’s a balancing act
16
Social Security
Your Portfolio
FRA
(Full Retirement Age)
$1,800
$2,200
Age 70
$2,232
$1,768
Age 62
$1,260
$2,740
Hypothetical example to illustrate how different Social Security claiming dates deliver different
income amounts. Assumes FRA is 67. Essential expense need is $4,000 per month.
Calculating Your Benefit
17
Your 35 highest years of earnings:
the basis for the calculation
Use your earnings
record to make key
decisions
• How much longer do you
want to work?
• Do you want to “replace”
low earnings years?
• Can you replace any $0
years with future wages?
18
Source: Social Security Administration.
Map out a plan for your earnings
history: continuous career
19
Year
#
Earnings Year
#
Earnings Year
#
Earnings
1980
1
$578
1990
11
$36,500
2001
21
$66,000
2011
31
$78,000
1981
2
$1,240
1991
12
$37,450
2002
22
$66,500
2012
32
$79,300
1982
3
$12,400
1992
13
$39,570
2003
23
$68,125
2013
33
$81,500
1983
4
$13,200
1993
14
$45,575
2004
24
$69,750
2014
34
$82,900
1984
5
$15,000
1994
15
$48,900
2005
25
$70,600
2015
35
$84,210
1985
6
$17,500
1995
16
$51,450
2006
26
$71,500
2016
36
1986
7
$19,500
1996
17
$54,680
2007
27
$72,800
2017
37
1987
8
$25,000
1997
18
$57,300
2008
28
$73,600
2018
38
1988
9
$27,610
1998
19
$62,000
2009
29
$75,000
2019
39
1989
10
$29,430
2000
20
$65,300
2010
30
$76,500
2020
40
Hypothetical example. For illustrative purposes only.
#
Earnings Year
Map out a plan for your earnings
history: career with breaks
20
Year
#
Earnings Year
#
Earnings Year
#
Earnings
1980
1
$578
1990
11
$0
2001
21
$16,000
2011
31
$45,000
1981
2
$1,240
1991
12
$17,450
2002
22
$16,500
2012
32
$46,300
1982
3
$12,400
1992
13
$23,570
2003
23
$0
2013
33
$47,500
1983
4
$13,200
1993
14
$25,575
2004
24
$0
2014
34
$48,900
1984
5
$15,000
1994
15
$28,900
2005
25
$0
2015
35
$50,210
1985
6
$7,500
1995
16
$31,450
2006
26
$0
2016
36
1986
7
$13,500
1996
17
$34,680
2007
27
$0
2017
37
1987
8
$16,000
1997
18
$37,300
2008
28
$0
2018
38
1988
9
$8,600
1998
19
$22,000
2009
29
$42,000
2019
39
1989
10
$0
2000
20
$15,300
2010
30
$43,500
2020
40
Hypothetical example. For illustrative purposes only.
#
Earnings Year
Calculating your benefit
1. The baseline for determining your benefit is
called your average indexed monthly
earnings (AIME)
Worker needs
40 “credits”
to qualify
Total the
highest 35 years
of earnings
21
Source: Social Security Administration.
Apply an earnings
index to calculate
your AIME
If you claim your benefit early,
there is a permanent reduction in income
Claim early
at age 62
FRA
66 and 4 months
~27%
52 months
early
Permanent
reduction
FRA
Age 67
Claim early
at age 62
30%
60 months
early
23
Permanent
reduction
Calculation based on Social Security reduction factors for claiming before FRA.
If you wait to claim, you earn delayed
retirement credits
Benefits are increased permanently if you wait to claim:
• 7.5% per year if you were born 1941–1942
• 8.0% per year if you were born 1943 or later
24
If your FRA is 66
If your FRA is 67
And you claim at age 70
And you claim at age 70
32% increase
24% increase
Note: If born on January 1 of any year, refer to the credit percentage for the previous year.
Source: Social Security Administration.
It’s Not Just When You Claim–
How You Claim Also Matters
27
Planning on your own requires your
time and attention to the details
Important strategies to consider:
• Optimize your Social Security payments
• Know your options with an
ex-spouse’s earnings record*
• File and Suspend strategy eliminated as
of May 1, 2016*
• Find out about surviving spouse benefits
• Understand the implications of claiming
and working
Implications of 2015 Budget Act*: If you reach your FRA by 5/1/2016 or
turn 62 by 12/31/2015, set up an appointment right away
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*Bipartisan Budget Act of 2015, signed into law on 11/2/2015. Sets a deadline of May 1, 2016, for changes
to selected Social Security claiming strategies.
Planning with your spouse requires
thoughtful coordination and timing
Important strategies to
consider:
• Optimize household income
• Maximize the survivor benefit
• Eliminating File and Suspend*
• Eliminating Claim Now, Claim More
Later*
Implications of 2015 Budget Act*: If you reach your FRA by 5/1/2016 or
turn 62 by 12/31/2015, set up an appointment right away
29
*Bipartisan Budget Act of 2015, signed into law on 11/2/2015. Sets a deadline of May 1, 2016, for changes
to selected Social Security claiming strategies.
Tips Before You Claim
30
How does working affect benefits?
It depends on how much you make…
In 2015,
you may
earn up to:
Make more,
and benefits
are withheld…
You are younger than FRA for
1 the entire year
$15,720
per year
$1 for every $2
over the limit
2 You will reach FRA in this year
$41,880
In the year
$1 for every $3
over the limit
You reach the month of your
3 FRA
No limit on
earnings
Benefits not
withheld
31
Source: Social Security Administration for 2015 tax year.
Are benefits taxed?
Depends on your “combined income”
Adjusted
Gross
Income
32
Nontaxable
Interest
Half Social
Security
Benefits
Combined
Income
Tax Filing
Combined Income
% of Benefit
Individual
$25,000–$34,000> $34,000
Up to 50%
Up to 85%
Joint
$32,000–$44,000> $44,000
Up to 50%
Up to 85%
Source: IRS and Social Security Administration for 2013 tax year. Updated publications generally
available in January.
IRS Resources
2014
IRS Form SSA-1099 annual Social Security
Benefits Statement
2014
Returns
IRS Publication 915—includes
important worksheets to estimate your
taxable Social Security benefits
33
For illustrative purposes only.
IRS Form W—4V—may choose a withholding
amount from Social Security benefits
Medicare is integrated
with Social Security
• Medicare and Social Security are managed centrally
• You can apply for Medicare through Social Security
• Costs for Medicare premiums are automatically
deducted from Social Security
• May be automatically enrolled in Medicare at age 65
34
Source: Social Security and Medicare websites.
Medicare is for individuals —
not for couples
Check your employer’s
health care benefits before turning 65
2015
You turn 65
35
3-Year Coverage Gap
2018
Your spouse or
partner turns 65
Adjust your estimate in your
retirement income plan
Adjust the amount on your
statement for:
• Claiming early
• Waiting to claim
• Earnings limits
• Medicare premiums
• Taxes
• WEP / GPO
36
For illustration purposes only. Sample statement from SSA.gov
Steps You Can Take
37
Step 1: Find your Social Security
Statement
•
Go to SSA.GOV to download
and print your current version
•
May receive in the mail or email
notification
38
For illustrative purposes only.
Step 2: Organize your financial
picture
Use the budget worksheet to:
• Estimate your essential
expenses
• Include your Social Security
estimate
• Assess the impact on your
portfolio to “pay for” retirement
39
For illustrative purposes only.
Step 3: Schedule a retirement income
planning meeting today
Fidelity Planning and Guidance Consultants
Our service is free and offered as an employee benefit to you.
Make an appointment
today to meet in person
Or meet over the phone:
866-715-2059
Build confidence to make the best decisions for your retirement.
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Methodology and Information
Guidance provided by Fidelity is educational.
The retirement planning information contained herein is general in nature and should not be considered legal or tax advice. Fidelity does not
provide legal or tax advice. This information is provided for general educational purposes only and you should bear in mind that laws of a
particular state and your particular situation may affect this information. You should consult your attorney or tax advisor regarding your
specific legal or tax situation.
The information is for educational purposes only.
The Bipartisan Budget Act of 2015 was signed into law on 11/2/2015. Please consult with your Tax Advisor regarding any decisions around
Social Security.
Fidelity Brokerage Services LLC, Member NYSE, SIPC, 900 Salem Street, Smithfield, RI 02917
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708820.9.0