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Social Security Primer. Matthew Schwerin CAPS Financial Group. Office (630 ) 474-9088 Cell (630 ) 247-0033 [email protected] Retirement Plan Review. Two kinds of retirement plans: 1) pensions (defined benefit), and 2) 401K type ( defined contribution)

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Social security primer

Social Security Primer

Matthew Schwerin

CAPS Financial Group

Office (630) 474-9088

Cell (630) 247-0033

[email protected]

Retirement plan review
Retirement Plan Review

  • Two kinds of retirement plans: 1) pensions (defined benefit), and 2) 401K type (defined contribution)

  • Pension income is a promise to pay, usually a monthly amount at a certain period, for as long as you live

  • Defined contribution plans is where you save money in an account with your name on it; you accumulate a balance and make the investment decisions

  • SS is obviously a pension plan - type benefit

  • With the demise of most pension plans, SS become that much more important (can’t outlive it!)

Some facts
Some Facts

  • Social security never meant to be sole source of retirement income for people

  • The more income you make, the less of a % of your income social security will provide

  • Life expectancy for 65 year old today: 82 for men, 85 for women

  • Currently there is a surplus of taxes being paid in to benefits taken out


  • You don’t have to “sign up”; mandatory!

  • Contributions through FICA taxes or self employment taxes

  • FICA taxes up to max of $117K of earnings

  • Current payments to retirees come from current workers’ FICA taxes

  • SS has a cost of living adjustment (COLA)

  • 2014 COLA was 1.5%

  • Medicare premiums deducted from SS check


  • Need to work in a SS covered job for 10 yrs & earn the minimum $ amt to earn 4 credits per year; need 40 total credits to qualify

  • Benefits are calculated on your highest 35 years of earnings (indexed for inflation)

  • You should apply about 3 months before you want benefits to begin


  • Earnings and some complicated rules determine your PIA (primary ins. amount)

  • PIA is, at age 62, what your benefit will be at full retirement age (FRA)

  • PIA will be adjusted for:

    • When benefits are claimed

    • Annual COLA’s

    • Additional years of earnings

  • Key objective of SS planning is to maximize your own benefits


  • If you take SS at age 62, you would collect 75% of your PIA at full retirement age

  • If you wait until 70, you can collect 132% of your PIA; each year you wait, benefit goes up 8%

  • See handout on age eligibility

  • See breakeven analysis handout

Spousal benefits
Spousal Benefits

  • Analysis of married couple benefits is more complicated than straight breakeven analysis

  • Several strategies for spouses with many different permutations

  • Example – file and suspend, spouse takes spousal benefit then takes own benefit

  • I want higher earning spouse to wait until 70, it then becomes longevity insurance using survivor benefit rules

Survivor benefits
Survivor Benefits

  • Upon your death, your spouse is entitled to receive a survivor benefit

  • The longer the worker waits, the higher the benefit amount the larger the survivor benefit will be

  • Survivor benefits can be paid as early as age 60 or 50 if the person is disabled

  • Unmarried children under 18 can receive survivor benefits

  • Sit down with SS rep to go over your options

Many other topics on ss
Many other topics on SS

  • Divorced benefits

  • Working while receiving benefits

  • Taxability of SS benefits

  • Will SS be around when I retire?

  • Should I count on SS in my retirement planning?

  • How do we fix SS?

Caps provides three services
CAPS Provides Three Services

  • Investment Management

  • Financial Planning

  • Retirement Plan Management (401K’s)

  • All provided on a 100% fee-only basis