1 Social Security: Maximizing Your BenefitTheodore J. Sarenski, CPA/PFS, CGMA, CFP, AEP Blue Ocean Strategic Capital, LLC March 26, 2015

2 Speaker Biography Ted is recognized locally and nationally as an expert providing financial planning advice. He currently appears on WSTM-3, Syracuse’s NBC affiliate, taking viewers’ calls and offering planning concepts to viewers. Ted appears on the PBS affiliate in Syracuse as a permanent guest host of the program “Financial Fitness” which airs live for one half hour every Thursday at 8 PM EST. He received the 2013 Distinguished Service Award by the American Institute of Certified Public Accountants (AICPA) Personal Financial Planning Division for contributions to industry-related publications and speaking engagements across the country. Ted authored articles on financial planning that have appeared in The Journal of Accountancy, The CPA Journal, The Journal of Taxation and the AICPA Wealth Management Insider. He authored a CPAs Guide to Social Security for the American Institute of CPAs in He has been interviewed and quoted in many publications including: USA Today, The Wall Street Journal, Consumer Reports, The Christian Science Monitor, Investment News, Kiplinger Personal Finance Report, Financial Planning Magazine (cover photo February 2013), Accounting Today and The Practical Accountant. Since 2005, Ted has been interviewed by hundreds of Radio Stations across the country on a variety of financial planning and income tax topics. Ted was interviewed for a 45 minute segment of NPR on the topic of retirement and Social Security in 2009.

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6 Annual Report of the Board of Trustees – July 28, 2014For the 75-year projection period, the present value of UNFUNDED obligations is $10.6 Trillion Reserves for Social Security will be fully depleted in 2033 Once depleted, annual Social Security receipts would be sufficient to pay 77% of scheduled benefits

7 Annual Report of the Board of Trustees – July 28, 2014Reserves for Social Security Disability will be fully depleted in 2016 Once depleted, annual Social Security disability receipts would be sufficient to pay 81% of Disability benefits To remain solvent – increase revenues from payroll tax by going to 15.23% from its current 12.4% OR reduce benefits for those eligible to start benefits in 2014 and the future by 20.8%

8 Facts and Figures Social Security maximum taxable income - $118,500 Medicare maximum taxable income – no limit Earnings exempt amount before penalty of $1 of benefit for every $2 earned when under age 66 the entire year - $15,720 Earnings exempt amount before penalty of $1 of benefit for every $3 earned in the year you become age 66 - $41,880 Maximum monthly Social Security benefit - $2,663

9 Social Security Facts – From 201358 million people received benefits totaling $816 Billion 39.9 million retirees and dependents – 74% 11.0 million disabled workers and dependents – 16% 6.2 million survivors – 10% Among the Elderly Social Security represents 50% or more of the income of: 53% of married couples 74% of unmarried persons Social Security represents 90% or more of the income of: 23% of married couples 46% of unmarried persons

10 Social Security Matters:

11 62 (early) vs. 66 (NRA): Break-even age is between 77 and 78.62 (early) vs. 70 (late): Break-even age is between 80 and 81. 66 (NRA) vs. 70 (late): Break-even age is between 83 and 84. © Urban Institute

12 62 (early) vs. 66 (NRA): Break-even age is between 77 and 78.62 (early) vs. 70 (late): Break-even age is between 80 and 81. 66 (NRA) vs. 70 (late): Break-even age is between 83 and 84. © Urban Institute

13 Social Security Facts – From 2013In 1940, life expectancy of a 65 year-old was almost 14 years – today it is more than 20 years By 2033, the number of Americans 62 and over will be 77.4 million – today 45.1 million By 2033, there will be 2.1 worker for every recipient – today it is 2.8 workers for every recipient Today – 51% of the workforce has no private pension coverage Today – 34% of the workforce has no savings set aside specifically for retirement

14 2014 Social Security Press ReleasesJanuary 15 – New Compassionate Allowances January 31 – New SSI Rules for Same Sex Couples February 19 – New Expedited DBL Process for Veterans March 4 – FY2015 President’s Budget Request for SS March 18 - New Expedited DBL Process for Veterans March 31 – New Fraud Prevention Unit in NY April 14 – Halting Referrals Under the Treasury Offset Program May 9 – Noah and Sophia win SS Most Popular Baby Names for 2013 June 20 – Defines Policy for Same Sex Married Couples June 27 – SS Leads Effort to Improve Customer Service across Feds

15 2014 Social Security Press ReleasesJuly 17-SS Extends Access to Benefit Verification July 28 – SS Board of Trustees Report August 15 – Cooperative Disability Investigations (CDI) in Detroit August 18 – SS Launches 1st National my Social Security Week September 16 – Agency Resumes Mailing SS Statements September 29 – SS Opens New National Support Center October 2 – Announces Representative Payee Pro Bono Pilot October 22 – SS Announces 1.7% Benefit Increase for 2015 November 14 – Fiscal Year 2014 Agency Financial Report

16 SOCIAL SECURITY STATEMENTS – or – HOW DO THEY COMPUTE THAT NUMBER?First step is to compute your Average Indexed Monthly Earnings (AIME) Multiply your earnings or the Maximum Taxable Amount, whichever is greater, for each year since 1950 by the index amount for that year. Add up the best 35 years indexed earnings Divide by 420 to get your AIME Second step is to compute your Primary Insurance Amount (PIA) Take 90% of the first $826 of AIME, plus 32% of the next $4,154 of AIME, plus 15% of AIME in excess of $4,980 This calculation is done for the year you reach age 62, whether you retire or not, and then indexed for inflation from that year.

17 WHEN DO YOU ADVISE TO BEGIN TAKING SOCIAL SECURITY BENEFITS?Year of Birth Full Retirement Age Payment at age 62 1937 or earlier 65 80% 1938 months 79.2% 1939 months 78.3% 1940 months 77.5% 1941 months 76.7% 1942 months 75.8% 1943 – 1954 66 75% 1955 months 74.2% 1956 months 73.3% 1957 months 72.5% 1958 months 71.7% 1959 months 70.8% 1960 and after 67 70%

18 Difference in Monthly Benefit – No Time Value or COLAAGE % of PIA Benefit at Max Social Security 62 75 $1,997 64 86.67 2,308 66 100 2,663 67 108 2,876 68 116 3,089 69 124 3,302 70 132 3,515

19 No Wage Earner TimelineHigher wage earner FRA $2,000 FRA Benefit File and Begin $2,640 Suspend Benefit No Wage Earner OR Begin $1,000 Spousal Benefit Begin $750 Spousal Benefit

20 Significant Lower Wage Earner TimelineHigher wage earner FRA $2,000 FRA Benefit File and Begin $2,640 Suspend Benefit Lower Wage Earner $600 at FRA OR Begin $1,000 Spousal Benefit Begin Reduced Add Spousal for total Own of $450 of $850

21 Not Significant Lower Wage Earner TimelineHigher wage earner FRA $2,000 FRA Benefit File for$700 Begin $2,640 Spousal Benefit Benefit Only Lower Wage Earner $1,400 at FRA Begin Reduced $1,050 Benefit a

22 Divorce Married for at least 10 yearsBeen divorced for at least 2 years Ex-spouse signing up for benefits is not a requirement Not re-married before age 60, UNLESS Subsequent marriage ended in divorce Subsequent marriage ended in death (not caused by survivor

23 This is not just for couples – possibly for every person!AND This is not just for couples – possibly for every person!

24 Other Issues: Disability BenefitsFamily Maximum for SS Disability Benefits 85% of the worker’s Average Indexed Monthly Earnings (AIME) HOWEVER – it cannot be less than the worker’s Primary Insurance Amount (PIA) nor more than 150% of the PIA Example: a worker’s AIME is $1,800. The worker would receive a disability payment of $1, on his/her own. 85% of AIME is $1,530; 150% of PIA is $1, ($ X 150%). Therefore, spouse and children could receive the additional $ ($1,530 - $ ) Eligible people include: Spouse (85%) Children (50%)

25 Other Issues: Death (Survivor) BenefitsFamily benefits with a family maximum limit The maximum family benefit is computed using a 4-tier formula instead of the usual 3-tier formula. When hitting the maximum family benefit, each beneficiary is reduced proportionately. 150% of the first $1,056 of the worker’s PIA 272% of the worker’s PIA over $1,056 up to $1,524 134% of the worker’s PIA over $1,524 up to $1,987 175% of the worker’s PIA over $1,987

26 Other Issues: Death (Survivor) BenefitsLump sum death benefit - $255 Benefit based on the insured worker’s PIA at date of death Eligible people include: Widow or widower – Age 60 (100%) OR any age (75%) if caring for the deceased’s child under age 16 or disabled Surviving divorced spouse – (happiest person) (100%) Unmarried children – under age 18 or up to 19 if still in high school (75%) Dependent parents – 62 or older who were dependent on the deceased for more than ½ of their support (2 – 75% each; %)

27 Repay and Reapply Withdraw your Social Security application and repay all of the benefits received in one lump sum, no interest! (Including spousal and/or children’s benefits) As of December 8, 2010, only allowed within 1 year of beginning benefits and only once per lifetime. You will likely advise this for a new client who made a decision before meeting with you to discuss the options for Social Security. Not unlike hearing they made a taxable transaction that they tell you about after-the-fact during tax time; except this is reversible!

28 Windfall Eliminations ProvisionAffects any worker who earned a pension in a job in which they did not pay Social Security taxes and also worked in a job that qualifies them for Social Security benefits. The percentage of the first bend point of the AIME calculation is reduced from 90% to 40% but the Social Security benefit cannot be reduced by more than ½ of such pension received.

29 Government Pension OffsetAffects federal employees hired before 1984 who continued to opt out of the Social Security system. Spousal or widow/widower Social Security benefit is reduced by 2/3 of the government pension being received by the individual. Only the government employee is affected, not the non-government employee spouse.

30 Other Social Security ItemsSame Sex Couples Representative Payee Non-Citizens Correct an Earnings Record When do You Get Your Check

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34 E-Mail: [email protected]Contact Information Ted Sarenski 333 W Washington Street Suite 220 Syracuse, NY 13202 Phone