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Getting the Most from Social Security
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Agenda
Know Your Benefit
Understand Your Options
Maximize Your Benefit
Getting Started
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Know Your Benefit
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Sources for retirement income for average income earners to sustain 80% – 100% of pre-retirement income
Employer-Sponsored Retirement Plan and Personal Savings
Social Security
Source: Social Security Administration, Office of Policy. Office of Research, Evaluation Statistics, Fast Facts and Figures About Social Security, 2010.
Know Your Benefit
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Social Security Full Retirement Age
Birth Year Full Retirement Age
1943-1954 66
1955 66 + 2 months
1956 66 + 4 months
1957 66 + 6 months
1958 66 + 8 months
1959 66 + 10 months
1960 and later 67
Source: 2011 Social Security Administration, ssa.gov/retire2/.
Know Your Benefit
Full Retirement Age
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Receivebenefitsearlier
Higher monthlycheck
No penalty for employment
Highest monthlypaycheck
No penalty for employment
Smallest monthlycheck
Potential reductionpenalty for employment
No interimbenefits
Receivebenefits later
62 70AGE
PROS
CONS
Full Retirement Age
Know Your Benefit
Your Age and Your Benefit
Electing your benefit — early vs. late
Working while collecting your benefit
Examining your tax situation
Considering your spouse’s benefit
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Understand Your Options
Understand Your Options
Early vs. Late
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130%
120%
110%
90%
80%
70%
Early vs. Late Benefit Election
Assuming Full Retirement Age at 66. Source: Social Security Administration.
100%62 63 64 65
67 68 69 70
Take Benefits EarlierTake Benefits Later
Retire at age 66 withfull monthly benefit
Working While Collecting
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Understand Your Options
Age 2011 Earned Income* Limits
Considerations
Under Full Retirement Age
$14,160 For every $2 over the limit, $1 is withheld from benefits
In the year Full Retirement Age
is reached$37,680
For every $3 over the limit, $1 is withheld from benefits until
the month in which full retirement age is reached
At Full Retirement Age
or older**
No limits on earnings
None
* Income from work, W-2, and self-employment income.** At FRA your benefit amount is adjusted to accommodate for the earlier reduction.
Examining Your Tax Situation
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Understand Your Options
Single Filing
Provisional* Income
Benefits Subject to Tax
Under $25,000 0%
$25,000 - $34,000 Up to 50%
Over $34,000 Up to 85%
Note: State and local taxes may differ.
Married Filing Jointly
Provisional* Income
Benefits Subject to Tax
Under $32,000 0%
$32,000 - $44,000 Up to 50%
Over $44,000 Up to 85%
* Provisional Income is Adjusted Gross Income including any tax-exempt interest plus 50% of Social Security benefits .
Source: 2010 Social Security Administration, http://www.ssa.gov/pubs/10035.html.
Consider Spousal Benefits
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Understand Your Options
Option 1Individual Benefit
Option 2Spousal Benefit
Option 3Survivor Benefit
Lower-earning spouse collects his or
her own individual benefit
Lower-earning spouse may collect a higher
spousal benefit (up to 50% of their spouse’s
full benefit) if the spouse has filed
A widowed spouse may collect survivor
benefits (up to 100% of their deceased spouse’s benefit)
Consider Spousal Benefits
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Understand Your Options
Social Security Benefits
Name Age 62 Age 66 Age 70
Ann $675 $900 $1,180
Sam $1,562 $2,071 $2,733
Spousal Benefit $724 $1,035 $1,035
Sam and Ann, both age 62
Full Retirement Age: 66
Maximize Your Benefit
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Social Security Strategy
Definition Benefit
Claim and Suspend
Individuals at FRA or later who have claimed benefits
then suspend the benefits. When benefits are reinstated down the road, they will receive a higher
benefit amount.
Allows spouse to claim spousal benefit, while the higher wage earner can continue to accrue
benefits. Can increase the overall lifetime benefits.
Claim Now, Claim More Later
A FRA individual may claim one-half of their spousal benefit, delay
taking their own benefit.1
Earn delayed credits and then claim their higher personal benefit at a later age or may help spouse
to receive greater survivor benefit.
Do-Over2 Individuals are allowed to change their earlier claiming decision.
Provides flexibility to cease taking benefits if life situation changes.
1 Benefit will be reduced if not at Full Retirement Age. Both individuals must have filed for Social Security benefits.
2 Effective December 2010, the Social Security Administration published new rules regarding the withdrawal but has not released a final ruling.
Visit ssa.gov for the most current information.
Calculate expected Social Security benefit
Determine your plan to maximize your benefit
Apply for retirement benefits
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Getting StartedMaximize Your Benefit
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• Most recent Social Security statement
• Most recent tax return
• Most recent pay statement from employer
• Latest statements from all retirement plans
• Latest statement from mutual funds
• Life and disability insurance policies
• Annuity contracts
• Wills and trust document(s)
Bring
Getting StartedMaximize Your Benefit
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Questions?
Investors should carefully consider a fund’s investment objectives, risks, charges, and expenses prior to investing. A prospectus containing this and other information can be obtained by contacting a financial professional, visiting principalfunds.com, or by calling 800-222-5852. Read the prospectus carefully before investing.
A mutual fund’s share price and investment return will vary with market conditions, and the principal value of an investment when you sell your shares may be more or less than the original cost.
The content of this presentation is based upon reliable source material and is believed to be correct as of the time of creation; however it is subject to change at any time without warning. Investors should consider consulting with their tax professionals prior to making decisions due to their unique circumstances.
While this communication may be used to promote or market a transaction or an idea that is discussed in the publication, it is intended to provide general information about the subject matter covered and is provided with the understanding that The Principal® is not rendering legal, accounting, or tax advice. It is not a marketed opinion and may not be used to avoid penalties under the Internal Revenue Code. You should consult with appropriate counsel or other advisors on all matters pertaining to legal, tax, or accounting obligations and requirements.
Principal Funds, Inc. is distributed by Principal Funds Distributor, Inc., member of the Principal Financial Group®. Principal Funds Distributor, Principal Shareholder Services, Principal Management Corporation and its affiliates, and Principal Funds, Inc. are collectively referred to as Principal Funds.
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©2010 Principal Financial Services, Inc.
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WE’LL GIVE YOU AN EDGE®
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