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Social Security
Analysis & Strategy

Financial Life Advisors

Ben Gurwitz
14607 San Pedro Ave
Suite 190
San Antonio, TX 78232
210-918-8998

Prepared for John Smith

and Joan Smith

Prepared on March 2, 2019

Analysis completed by Ben Gurwitz at Financial Life Advisors | 1

EXECUTIVE SUMMARY

For most Americans, Social Security is a significant retirement asset. Making the best possible selections
related to your Social Security options can mean a material difference in the income it provides to you over
the course of your retirement years. Our firm uses software created by the industry leader in Social
Security claiming strategies.

The purpose of this Social Security Analysis and Strategy Report is to:

Offer a high-level introduction to and education about your Social Security retirement benefit
options.
Help you determine when to begin benefits.

Analysis completed by Ben Gurwitz at Financial Life Advisors | 2

WHAT YOU WILL FIND IN THE FOLLOWING PAGES

We've provided a great deal of information in this report. Some key highlights are:

An introduction to Social Security, explanation of key terms, and an explanation about how your
benefits are calculated.
An analysis that compares your cumulative Social Security benefits for different starting dates and
life expectancies.
A retirement needs analysis that compares the cumulative financial needs from your financial
portfolio needed to meet your projected expenses.
A case study that demonstrates how the choice of Social Security starting date can extend the
financial portfolio's longevity, that is, how long until your savings is exhausted.

Please read the Important Disclosure section at the end of this report.

Analysis completed by Ben Gurwitz at Financial Life Advisors | 3

KEY ASSUMPTIONS ABOUT THIS REPORT

As you review your Social Security Analysis and Strategy Report, please keep in mind that

1. This report is designed to illustrate the importance of your decision on when to begin Social
Security benefits and to help you decide the best strategy for your situation. Detailed analysis is
needed to compare different strategies side by side, especially if you are married and spousal
benefits are considered.
2. This report is provided for informational purposes only. The information and data should not be
acted upon or taken as advice. The purpose of the report is to educate and give general guidance to
help you craft a personalized approach in taking Social Security.
3. All the information provided is based on current Social Security rules, benefits calculations, and
payout promises on existing funding levels.

Analysis completed by Ben Gurwitz at Financial Life Advisors | 4

KEY TERMS

You may find some of these key terms throughout your report.

Children's (or Family) Benefits: Benefits received by dependent children that supplement family
income.

Cumulative Benefits: Lifetime payout of Social Security benefits.

Delayed Retirement Credits: Increases in monthly Social Security benefits if you delay taking benefits.

Delayed Strategy: Claiming benefits after Full Retirement Age (FRA) in order to receive increased
benefits.

Divorced Benefits: Benefits paid to the divorced spouse of an eligible worker to whom you were
married at least 10 years.

Early Strategy: Claiming benefits at any time before Full Retirement Age (FRA).

Earnings Record: The history of your earnings for the years you have worked in your lifetime.

Earnings Test: The reduction in benefits taken if you continue to work while receiving benefits before
you reach Full Retirement Age (FRA). Once you reach FRA, the earnings test does not apply to your
income, and there is no limit on your earnings.

File and Suspend: A Social Security policy allowing a worker to file an application for retirement benefits
but immediately suspend payments. This makes the worker's spouse eligible to file for and receive spousal
benefits. This also allows the worker's benefit to accrue delayed retirement credits. However, the
Bipartisan Budget Act of 2015 has altered this policy. Beginning 180 days after the date the act was
signed into law, no benefits will be paid to any family members when a worker's benefits are suspended.

Full Retirement Age: The age at which you are eligible for your full monthly benefit.

Government Pension Offset (GPO): A provision that reduces and may eliminate the amount of
spousal and survivor benefits paid to an individual who is eligible for a pension from work not covered by
Social Security taxes.

Inflation: A decrease in the value and purchasing power of money.

Longevity Risk: The risk of running out of resources in your lifetime.

Monthly Benefit Amount: Also known as your Primary Insurance Amount (PIA), this is the benefit you
will receive at your Full Retirement Age (FRA).

Analysis completed by Ben Gurwitz at Financial Life Advisors | 5

Non-Covered Pension: Some workers, especially state government employees including teachers, are
eligible for a pension for work where Social Security taxes were not withheld from or paid on earnings.
Such a pension is known as a non-covered pension.

Primary Insurance Amount: The monthly benefit amount based on your earnings record if you begin
your benefits at your full retirement age.

Restricted Application: When a worker is eligible for both his or her own benefit and a spousal benefit,
a restricted application can be filed for spousal benefits only, meaning the worker's own benefit will
continue to accrue delayed retirement credits. However, the Bipartisan Budget Act of 2015 has altered
this policy. Beginning 180 days after the date the act was signed into law, only people age 62 or older on or
before January 1, 2016, will have the option to restrict an application for spousal benefits only.

Spousal Benefits: Benefits paid to the spouse of an eligible worker. You must be at least age 62 to claim
spousal benefits.

Survivor Benefits: Benefits paid to the surviving spouse of a deceased eligible worker.

WEP-PIA:This term applies to someone who is eligible for a pension from work not covered by Social
Security taxes. The WEP-PIA reflects the adjustment to your Primary Insurance Amount because of the
Windfall Elimination Provision (WEP).

Windfall Elimination Provision (WEP):A provision that may reduce Social Security benefits based on
your earnings history if you are eligible to receive a pension from work not covered by Social Security.

Analysis completed by Ben Gurwitz at Financial Life Advisors | 6

LET'S START WITH THE BASICS...

When you elect to begin receiving Social Security payments is important. You may retire from a career at
age 62, but beginning benefits at age 62 may not be the best choice. The age at which you begin will impact
your benefits for the rest of your life -- and potentially benefits available to your spouse if you are married.

There are several factors that should be considered before selecting the optimal date to begin benefits.
Your health status, life expectancy, need for income, whether or not you plan to continue working, and
how concerned you are about running out of money in your lifetime should all be considerations in
determining your date to begin benefits. Analysis requires careful consideration of the inputs,
assumptions and other factors that will impact your Social Security benefits including the taxation of those
benefits.

While having a strategy for when to begin Social Security benefits is important, it is critical to consider
Social Security benefits in conjunction with all of your retirement assets for an optimal strategy.
Incorporating your benefits into an overall retirement income plan may make a material difference in the
amount of income available to you in retirement.

Analysis completed by Ben Gurwitz at Financial Life Advisors | 7

HOW YOUR BENEFIT ELIGIBILITY IS DETERMINED

Your benefit eligibility will depend on:

1. How much you earned over your working career

2. The age at which you apply for benefits
3. Spousal benefits - extra money allocated to married couples
4. Survivor benefits - reassessment of benefits to help the surviving spouse

Social Security benefits are based on average earnings over your highest 35 years of income, with
earnings through age 60 indexed to reflect increases in U.S. workers' average wage level. For example, if
the wage level in the U.S. is twice as high when you turn 60 as when you were 40, the formula doubles
your age 40 earnings. If you worked less than 35 years, the "missing" years are calculated as zero. The
maximum income in any year is equal to that year's maximum income subject to Social Security taxes.

If you claim benefits earlier than your Full Retirement Age (FRA) and continue to have more than a modest
amount of earned income (e.g., wages and salary), you may lose some or all of your Social Security benefits.
In addition, if you had wages from work not covered by Social Security, then the Social Security
Administration's estimates of your benefits may be substantially too high.

Analysis completed by Ben Gurwitz at Financial Life Advisors | 8

THE IMPACT OF STARTING AGE ON MONTHLY BENEFITS

Many personal and household factors can influence your Social Security retirement benefits, and perhaps
the most significant is the age you begin benefits. You can see below the range of benefits you would
receive depending on the age you begin benefits. This does not include the impact of spousal benefits if
you are married, which can make a significant difference when added in. The information below was
created from information you provided.

John Smith
Monthly benefits if begun at 62 $1,910
Monthly benefits if begun at Full Retirement Age 66 and 8 months $2,650
Monthly benefits if begun at 70 $3,357
Joan Smith
Monthly benefits if begun at 62 $1,268
Monthly benefits if begun at Full Retirement Age 67 $1,800
Monthly benefits if begun at 70 $2,232

Benefit projections above are based on the estimated Primary Insurance Amount at Full Retirement Age that you provided.
Benefit amounts may change based on additional earnings or changes in earnings that can impact the Primary Insurance
Amount. If you are already receiving benefits, your actual benefit payments may differ from the estimates above based on when
you began collecting. All benefits levels in the table above are expressed in today's dollars. All payments will increase with Cost
of Living Adjustments (COLAs). If older than age 62 or if benefits have already started, the amount reflected as the age 62
monthly benefit will be the current benefit eligibility amount.

Not only does the age you begin benefits impact your monthly payments, it also affects your "longevity
risk" - the risk of outliving your resources. If you choose to begin receiving Social Security benefits before
your Full Retirement Age (FRA), your monthly benefits will be reduced. If you delay the start of benefits
until after your Full Retirement Age (FRA), your monthly benefits will be increased. So, the basic tradeoff
is between beginning earlier and receiving more but smaller payments or beginning later and receiving
fewer but larger payments.

Since John was born in 1958, FRA is 66 and 8 months and any benefit taken before age 66 and 8 months
will be reduced by 5/9% per month for up to 36 months, plus 5/12% per month for the remaining months
of the early claim. So, if benefits are begun at age 62, the monthly benefit level would be $1,910. Benefits
delayed beyond FRA will grow by 2/3% per month until age 70. Delaying the start of benefits until age 70
will increase the monthly benefit to $3,357. While we've used John's information for the purposes of
explanation, the same basic calculations apply also to Joan's benefits. All benefit levels are expressed in
today's (i.e., inflation-adjusted) dollars and reflect the current promises of the Social Security system,
which can be altered by the U.S. Congress at any time.

Analysis completed by Ben Gurwitz at Financial Life Advisors | 9

HOW YOUR SELECTED STRATEGY MAKES A DIFFERENCE

Your selected strategy for claiming Social Security benefits is customized to your specific situation and is
based on the information you provided. To create your selected strategy, our firm analyzed all the possible
claiming strategies available to you and the overall benefit each would render. We weighed many factors
in suggesting this strategy for you, including monthly benefit amount, your life expectancy, your marital
status and others.

Estimated Cumulative Total Benefits

$1,500,000 We have suggested a claiming

strategy that would pay about
$1,000,000
$500,000
$1,588,275
$0
60 70 80 90 100
over your remaining life
Age expectancy. The details of this
strategy and how it works are
Early Primary FRA discussed in this report.

Your selected strategy was created using the expected lifetimes of 90 for John and 95 for Joan. Given
these assumptions, you need to maximize benefits for a potentially long joint life. By maximizing
cumulative lifetime benefits, your selected strategy also reduces the chance of running out of savings in
your lifetime.
Lifetime Income By
Starting Dates

The graph on the right represents the cumulative

lifetime benefits you could expect to receive over
your life expectancy if you took benefits early
(represented by the red bar), at Full Retirement Age
(represented by the blue bar), or according to the
primary strategy we have created for you
(represented by the green bar).
Early Dates
Recommended Dates
Full Retirement Dates

Analysis completed by Ben Gurwitz at Financial Life Advisors | 10

PROTECTION AGAINST LONGEVITY RISK

The best strategy for you balances your cumulative lifetime benefits with the income you can expect to
receive from Social Security and any other assets should you live longer than the ages you provided, 90
years for John and 95 years for Joan. This concept is known as "longevity risk," or the risk that you will run
out of money in your lifetime.

The reason this is an important part of your Social Security decision is that, the longer your life, the longer
your retirement savings must last. Getting more from your Social Security benefits means that you will
need to withdraw less from your portfolio over the years.

$2,000,000
The green bar in the graph on
the left illustrates the
$1,500,000 cumulative lifetime benefit
you could expect to receive
$1,000,000 should you live to the exact
life expectancy you provided.
The orange bar represents
$500,000 the comparative value of the
cumulative lifetime benefits
$0 should you live 10 years
Early Primary FRA longer than expected.

Projected Life Span Long Life Span

Analysis completed by Ben Gurwitz at Financial Life Advisors | 11

THE DIFFERENCE A LONG LIFE MAKES

The table below shows the approximate value of your lifetime cumulative benefits over your life
expectancy if you choose to take benefits early, at Full Retirement Age or according to the primary
strategy we have created for you. The Short Life Span row illustrates the amount if each of you lives 10
years less than you plan. The Projected Life Span row illustrates the amount if each of you lives to the
exact age you provided. The Long Life Span row is the amount you could expect if each of you lives 10
years longer than expected.

Early Age Primary Age Full Retirement Age

Short Life Span $883,279 $967,629 $927,550
Projected Life Span $1,264,603 $1,628,181 $1,461,550
Long Life Span $1,645,927 $2,288,733 $1,995,550

Analysis completed by Ben Gurwitz at Financial Life Advisors | 12

IMPORTANT FILING DATES

In order for you to take advantage of this strategy, you should pay close attention to these filing dates:

Joan begins benefits based on her earnings record in the estimated amount of $1,268 in September
2026 at age 62 and 1 months.
John begins benefits based on his earnings record in the estimated amount of $3,357 in May 2028
at age 70.
In May 2048 Joan switches to survivor benefits in the estimated amount of $3,357.

Be sure to file for benefits about three months before you expect to receive your first payment.

Analysis completed by Ben Gurwitz at Financial Life Advisors | 13

ANNUAL BENEFITS YOU CAN EXPECT BY AGE WITH PRIMARY
STRATEGY

The graph below illustrates the annual total income you, or you and your spouse if married, would receive
by using the primary strategy.
Annual Benefits

$60,000

$50,000

$40,000

$30,000

$20,000

$10,000

$0
65 70 75 80 85 90 95 100

EXPENSES AND YOUR ANNUAL BENEFITS

The graph below compares your estimated annual spending against your Social Security income. If you are
married, the graph illustrates your joint Social Security income. The green lines represent your expected
Social Security income, and red lines represent a gap between your income and spending that will need to
be addressed. You might have additional savings you can use to meet your spending needs, or you can
adjust your spending so that your Social Security income is sufficient. If the graph displays only green bars,
your estimated spending does not exceed your social security income.

$50,000

$40,000

$30,000

$20,000

$10,000

$0
2019
2020
2021
2022
2023
2024
2025
2026
2027
2028
2029
2030
2031
2032
2033
2034
2035
2036
2037
2038
2039
2040
2041
2042
2043
2044
2045
2046
2047
2048
2049
2050
2051
2052
2053
2054
2055
2056
2057
2058
59
20

Analysis completed by Ben Gurwitz at Financial Life Advisors | 14

YOUR PRIMARY SOCIAL SECURITY STRATEGY DETAILS

We've constructed this primary strategy based on the information you provided. Your primary strategy
was created to balance two equally important yet separate goals: get the most lifetime income and offer
income protection if you live longer than expected. While getting the highest cumulative lifetime benefit
may initially seem most important, taking both criteria into account is prudent in the event you live longer
than expected. Our tools allow you to compare your primary strategy against other strategies to ensure
that the primary strategy is best for your situation.

NOTE: If your selected strategy includes filing a "restricted application for spousal benefits only," be
prepared to refer the agent to POMS GN 00204.020 (POMS is the internal process resource used by the
Social Security Administration).

Joan begins benefits based on her earnings record in the estimated amount of $1,268 in September
2026 at age 62 and 1 months.
John begins benefits based on his earnings record in the estimated amount of $3,357 in May 2028
at age 70.
In May 2048 Joan switches to survivor benefits in the estimated amount of $3,357.

HERE'S WHY YOUR PRIMARY STRATEGY WAS SELECTED:

The primary strategy reflects a specific strategy for claiming your Social Security benefits and is in line
with two goals shared by most retirees: maximizing expected lifetime benefits and minimizing longevity
risk. It also has incorporated any complicated strategies around spousal benefits that will result in more
money for you.

Our primary strategy is based on your life expectancy inputs and is the strategy that will likely provide the
greatest cumulative lifetime benefit. However, because you are married, you should also consider survivor
benefits in your claiming strategy. A surviving spouse can receive the larger of the two benefit amounts,
but not both. If at least the higher earner waits to begin benefits on his or her earnings record until age 70,
survivor income will be greatest. However, if you live a short life, waiting may increase survivor benefits,
but it may not provide the greatest cumulative lifetime payout over your joint lifetimes. You should
carefully consider these factors as you determine your best starting age.

Furthermore, because waiting to claim benefits increases your benefit with delayed retirement credits, it
decreases the amount of money that must be withdrawn from savings each month and reduces the chance
that a surviving spouse will run out of money in his or her lifetime.

If your primary strategy states that one of you should "file and suspend" or "file a restricted application,"
be certain that you are clear about this with the agent taking your application. It is not uncommon for an
agent to be unfamiliar with a claiming strategy. If the agent is hesitant, ask to speak with a "technical
expert" or an office manager. Also note: the Bipartisan Budget Act of 2015 made changes to Social
Security law that impact these two strategies. If these are part of your primary strategy, note that there
are deadlines that may impact your ability to use them. Before adopting your primary strategy, or any
other strategy, talk with your financial professional.

Analysis completed by Ben Gurwitz at Financial Life Advisors | 15

HERE'S WHEN IT MIGHT NOT WORK:

Your primary strategy may not be your best choice if either of you live significantly longer or shorter than
projected, or if you continue to work and are younger than Full Retirement Age.

If you continue to work and are younger than Full Retirement Age:

Social Security benefits based on your earnings record (including your spouse's spousal benefits)
will be subject to an earnings test, which could reduce those benefits. The earnings test does not
apply after you reach Full Retirement Age.
If the earnings test will result in the loss of most or all of these benefits, you should consider waiting
until Full Retirement Age (or until you stop working, whichever is sooner) to file for benefits.

*This primary strategy assumes you will not receive a pension from work not covered by Social Security. If
this assumption does not apply to you, the primary strategy may not be your best strategy for claiming
Social Security benefits.

Analysis completed by Ben Gurwitz at Financial Life Advisors | 16

WHY TAXES MATTER

Many people are not familiar with taxation on Social Security benefits. If Social Security is your only
income, benefits will not be taxable. But if you have other income, including income from a pension,
withdrawals from a 401(k), or investment income, taxes may be owed on up to 85% of your benefits. For
each taxpayer, there is a range of income where 50% or 85% of their Social Security benefit is included in
their taxable income. The actual rate that applies depends on your marginal tax rate. This tax effect can
make a significant difference in the Social Security benefit you are able to collect and may mean you should
use an alternate claiming strategy. If you plan to work after beginning Social Security benefits and before
reaching your Full Retirement Age, we may be able to assist with some careful analysis and planning
intended to reduce the impact of taxes on your benefits.

Analysis completed by Ben Gurwitz at Financial Life Advisors | 17

ANALYSIS OF CUMULATIVE LIFETIME BENEFITS

On the following pages, you will see schedules that compare the differences between two Social Security
claiming strategies.

Schedule 1 illustrates the difference in both monthly and cumulative lifetime benefits between two
strategies for claiming benefits. The "breakeven line" indicates the age at which one strategy begins to pay
more in benefits than the other, meaning that if you live beyond that age, the primary strategy is probably
the best choice for your situation.

Schedule 2 calculates the amount of funds you will need to withdraw from your savings each year to
supplement your Social Security benefits in order to meet your expected spending needs. It shows the
annual and cumulative withdrawals for each of the two strategies. The breakeven line marks the age at
which the two strategies require the same amount of cumulative withdrawals from your financial
portfolio.

Typically, starting Social Security benefits early will require smaller withdrawals from your financial
portfolio in the early years because the Social Security income is helping to meet your spending needs. In
contrast, waiting to begin benefits will provide a significantly higher monthly benefit for the remainder of
your lifetime. The result is that your savings may last longer because the larger Social Security benefit
allows you to withdraw less from your portfolio over time.

Analysis completed by Ben Gurwitz at Financial Life Advisors | 18

SCHEDULE 1

Breakeven Analysis comparing two strategies:

Early John@70, Joan@62

Year John Joan Difference
John Joan John Joan
Annual Benefits Cumulative Benefits Annual Benefits Cumulative Benefits
(PIA=2650.0) (PIA=1800.0) (PIA=2650.0) (PIA=1800.0)

2019 61 55 $0 $0 $0 $0 $0 $0 $0 $0 $0
2020 62 56 $1,910 $0 $13,371 $13,371 $0 $0 $0 $0 ($13,371)
2021 63 57 $1,910 $0 $22,922 $36,294 $0 $0 $0 $0 ($36,294)
2022 64 58 $1,910 $0 $22,922 $59,216 $0 $0 $0 $0 ($59,216)
2023 65 59 $1,910 $0 $22,922 $82,138 $0 $0 $0 $0 ($82,138)
2024 66 60 $1,910 $0 $22,922 $105,061 $0 $0 $0 $0 ($105,061)
2025 67 61 $1,910 $0 $22,922 $127,983 $0 $0 $0 $0 ($127,983)
2026 68 62 $1,910 $1,268 $27,992 $155,976 $0 $1,268 $5,070 $5,070 ($150,906)
2027 69 63 $1,910 $1,268 $38,132 $194,108 $0 $1,268 $15,210 $20,280 ($173,828)
2028 70 64 $1,910 $1,268 $38,132 $232,240 $3,357 $1,268 $42,063 $62,343 ($169,897)
2029 71 65 $1,910 $1,268 $38,132 $270,373 $3,357 $1,268 $55,489 $117,832 ($152,541)
2030 72 66 $1,910 $1,268 $38,132 $308,505 $3,357 $1,268 $55,489 $173,321 ($135,184)
2031 73 67 $1,910 $1,268 $38,132 $346,638 $3,357 $1,268 $55,489 $228,810 ($117,828)
2032 74 68 $1,910 $1,268 $38,132 $384,770 $3,357 $1,268 $55,489 $284,300 ($100,470)
2033 75 69 $1,910 $1,268 $38,132 $422,902 $3,357 $1,268 $55,489 $339,789 ($83,113)
2034 76 70 $1,910 $1,268 $38,132 $461,035 $3,357 $1,268 $55,489 $395,278 ($65,757)
2035 77 71 $1,910 $1,268 $38,132 $499,167 $3,357 $1,268 $55,489 $450,767 ($48,400)
2036 78 72 $1,910 $1,268 $38,132 $537,300 $3,357 $1,268 $55,489 $506,256 ($31,044)
2037 79 73 $1,910 $1,268 $38,132 $575,432 $3,357 $1,268 $55,489 $561,745 ($13,687)
Break Even Point
2038 80 74 $1,910 $1,268 $38,132 $613,564 $3,357 $1,268 $55,489 $617,235 $3,671
2039 81 75 $1,910 $1,268 $38,132 $651,697 $3,357 $1,268 $55,489 $672,724 $21,027
2040 82 76 $1,910 $1,268 $38,132 $689,829 $3,357 $1,268 $55,489 $728,213 $38,384
2041 83 77 $1,910 $1,268 $38,132 $727,961 $3,357 $1,268 $55,489 $783,702 $55,741
2042 84 78 $1,910 $1,268 $38,132 $766,094 $3,357 $1,268 $55,489 $839,191 $73,097
2043 85 79 $1,910 $1,268 $38,132 $804,226 $3,357 $1,268 $55,489 $894,680 $90,454
2044 86 80 $1,910 $1,268 $38,132 $842,358 $3,357 $1,268 $55,489 $950,170 $107,812
2045 87 81 $1,910 $1,268 $38,132 $880,491 $3,357 $1,268 $55,489 $1,005,659 $125,168
2046 88 82 $1,910 $1,268 $38,132 $918,623 $3,357 $1,268 $55,489 $1,061,148 $142,525
2047 89 83 $1,910 $1,268 $38,132 $956,756 $3,357 $1,268 $55,489 $1,116,637 $159,881
2048 90 84 $1,910 $2,186 $30,200 $986,956 $3,357 $3,357 $45,349 $1,161,986 $175,030
2049 91 85 $0 $2,186 $26,234 $1,013,190 $0 $3,357 $40,279 $1,202,266 $189,076
2050 92 86 $0 $2,186 $26,234 $1,039,425 $0 $3,357 $40,279 $1,242,545 $203,120
2051 93 87 $0 $2,186 $26,234 $1,065,659 $0 $3,357 $40,279 $1,282,824 $217,165
2052 94 88 $0 $2,186 $26,234 $1,091,893 $0 $3,357 $40,279 $1,323,103 $231,210
2053 95 89 $0 $2,186 $26,234 $1,118,128 $0 $3,357 $40,279 $1,363,382 $245,254
2054 96 90 $0 $2,186 $26,234 $1,144,362 $0 $3,357 $40,279 $1,403,662 $259,300
2055 97 91 $0 $2,186 $26,234 $1,170,596 $0 $3,357 $40,279 $1,443,941 $273,345
2056 98 92 $0 $2,186 $26,234 $1,196,831 $0 $3,357 $40,279 $1,484,220 $287,389
2057 99 93 $0 $2,186 $26,234 $1,223,065 $0 $3,357 $40,279 $1,524,499 $301,434
2058 100 94 $0 $2,186 $26,234 $1,249,300 $0 $3,357 $40,279 $1,564,778 $315,478
2059 101 95 $0 $2,186 $15,303 $1,264,603 $0 $3,357 $23,496 $1,588,275 $323,672

Analysis completed by Ben Gurwitz at Financial Life Advisors | 19

HEALTHCARE COSTS IN RETIREMENT

Most retirees are concerned about healthcare costs in retirement. However, many avoid planning for
healthcare costs because both media and academic information is overwhelming. Often, though, retirees
find that their actual spending on health-related goods and services in retirement differs significantly from
projected estimates. So let’s begin with the average annual expenditures actually reported by retirees.

The U.S. Bureau of Labor Statistics completes periodic surveys of American consumers related to actual
expenditures – including expenditures on health insurance, out-of-pocket healthcare, and other related
expenses in retirement.1 According to 2014 actual spending data, the average consumer over age 65
reports the following expenditures on health-related services:

Insurance premiums (including Medicare Part B and Medicare Part D) $3,951

Prescription drug out-of-pocket expenditures $721
Medical services (including dental and vision out-of-pocket expenses and medical
$1,181
supplies not covered by insurance)
TOTAL annual expenditures on healthcare $5,853
1U.S. Bureau of Labor Statistics Consumer Expenditure Survey, 2014.

The allocation for health-related expenditures as compared to the total spent is:
Prescription,
out-of-pocket
14%

Medical
Services 16%

Insurance
Premiums 70%

As you can see from the chart above, insurance premiums account for the largest percentage of
health-related expenditures; however, when compared to the average consumption of health services
while in retirement, insurance premiums are essential. According to the Urban Institute in 2014, the
average married couple receives lifetime Medicare benefits of about $427,000. The average single male
receives about $197,000 in benefits, while the average single female receives about $230,000.

Costs for health-related services are certainly dependent on a number of factors including your health
status, family history, age, employer-provided services, geography, and even your marital status. This
report assumes that you fall into the average expenditures listed above. If you believe your actual
expenditures will be more, you should plan accordingly. In addition, we’ve assumed that your income in
retirement falls below the lowest threshold and you will not be subject to higher Medicare premiums
based on income.

Analysis completed by Ben Gurwitz at Financial Life Advisors | 20

YOUR EXPECTED HEALTHCARE COSTS IN RETIREMENT

Based on your life expectancy of 90 for John and 95 for Joan, you should plan for the following
health-related expenditures in retirement:

John: $146,325 (cumulative lifetime total in today's dollars)

Joan: $175,590 (cumulative lifetime total in today's dollars)

To arrive at these amounts, we calculated the number of years between Medicare eligibility at age 65 and
your estimated life expectancy, then we multiplied by the annual expenditures reported to the U.S. Bureau
of Labor Statistics in 2014. Your actual expenditures may be more or less than this projection.

The amounts above are in current dollars and are not adjusted for inflation. However, according to the
Kaiser Family Foundation, healthcare costs over the past 25 years have risen at an average of more than
6% per year. Future costs are expected to rise at about the same rate over the next decade, it's important
to work with your financial professional to plan for these expenses.

MEDICARE EXPENSES
Introduction

As you develop and manage plans for your future, medical insurance is a key component of your financial
stability. To this end, as you approach age 65 you should become knowledgeable about Medicare coverage
and what you need to do to ensure uninterrupted coverage and/or late enrollment premium penalties,
regardless of your current medical coverage and work status.

Recommended Medicare Enrollment Dates

John and Joan, by enrolling during the enrollment period below – or in your special enrollment period
after employer coverage ends – you will avoid gaps in coverage and late enrollment penalties.

Based on the birth date (s) you provided, your Medicare enrollment dates are below.

John should enroll for Medicare coverage between February 2023 and August 2023.
Joan should enroll for Medicare coverage between May 2029 and November 2029.

Medicare Categories

Like Social Security, Medicare can seem overwhelming. Medicare has 4 categories of coverage: parts A, B,
C and D.

Part A is “hospital insurance” and helps pay for inpatient hospital care, skilled nursing facilities, hospice
care, and some home health care. Because people usually pay for Part A coverage through a federal
Medicare tax while working (1.45% of wages), most don't pay a deductible or monthly premium after age
65. However, if you did not pay Medicare taxes while working, you may still be able to purchase Part A
coverage.

Analysis completed by Ben Gurwitz at Financial Life Advisors | 21

Part B is “medical insurance” and helps pay for doctors’ visits, outpatient hospital care, physical and
occupational therapy and some home health care. Part B coverage requires payment of a monthly
premium. Premiums are set annually, and the premium is adjusted based on income thresholds.

Part C combines Part A, Part B, and, sometimes, Part D (prescription drug) coverage. These plans are
called Medicare Advantage Plans and are managed by private insurance companies approved by
Medicare. Rates for Plan C, and the coverage included, vary by carrier.

Part D provides coverage for prescription drug benefits. Plans vary by cost, number of drugs covered and
pharmacies on each plan, but all plans must meet a minimum standard for drug coverage set by Medicare.
The average monthly premium is around $40, ranging from $15 to $130 monthly.

“Medigap” policies are available to people who do not purchase a Medicare Advantage Plan. Medigap
plans will cover payment for some costs not covered by Parts A, B and D.

Even if you have a plan for each of the parts A, B, C, and D, not all medically-related services will be
covered. Most notably, long-term (or custodial) care is not covered. Cosmetic surgery and alternative
therapies such as acupuncture are not covered. And most plans do not cover dental or vision care, or
hearing devices.

In determining what coverage you will need, you should create a list of services that are important to you
or any medical condition you may have. In your evaluation of your options, make certain these services are
covered by any plan you are considering. The website [Link] can provide additional help in
comparing plans.

Important Medicare Enrollment Dates:

Understanding Initial and Special enrollment dates, and requirements for each, is important.

If you are planning to enroll in Medicare, the enrollment dates are critical for you in order to avoid delayed
coverage which could result in a period of time with no coverage or a late enrollment penalty. When you're
first eligible for Medicare, you have a 7-month Initial Enrollment Period to sign up. For example, if you're
eligible when you turn 65, you can sign up during the 7-month period that begins 3 months before the
month you turn 65, includes the month you turn 65, and ends 3 months after the month you turn 65. If you
didn't sign up for Medicare when you were first eligible, you can sign up during the General Enrollment
Period between January 1–March 31 each year and your coverage will start July 1.

If you incur a late enrollment penalty, it is permanent, meaning that your premiums will forever bear the
added penalty. The penalty is 10% of the effective premium amount for each year you have no coverage.
Here is an example:

John was quite healthy when he retired from work at 64, so he chose not to continue his employer
coverage after leaving. He knew he would be able to enroll in Medicare at some point when he needed
coverage. When John turned 65, he was still very healthy and decided to forego Medicare enrollment. But
when John turned 67, he wasn’t quite as healthy and decided to enroll in Medicare. To John’s surprise, his
late enrollment – two full years after his eligibility – carried a 20% penalty, 10% for each year he had no
coverage. And the penalty was 20% of the new, increased premium each year.

Important Note for Those Still Working, Collecting Employer Long Term Disability or Covered Under
COBRA: John and Joan , if you are still working and will be covered by an employer-sponsored healthcare
plan with a company of 20 or more employees when you reach age 65 and won’t need Medicare right
away, the recommend enrollment dates might not apply to you. However, should your employer coverage
end (including employees on Long Term Disability or covered under COBRA), you will be subject to a

Analysis completed by Ben Gurwitz at Financial Life Advisors | 22

special enrollment period of eight months that begins when you leave work or when your coverage ends,
whichever occurs first. The following caveats should be kept in mind:

COBRA is not considered as coverage for the purpose of calculating when healthcare coverage
ended.
Some employer retiree medical insurance plans require you to sign up for Medicare when you are
initially eligible, and Medicare then becomes the primary payer in coordination of benefits. You
should speak to a benefits representative with your employer to determine if you might be required
to enroll in Medicare for coordination of benefits.
Under some group retiree plans, if you select a Part D offering, you could forfeit some or all of your
retiree medical coverage for you and all your dependents. Be sure to know your specific plan
benefits and rules.

Medicare Part B Premiums:

The amount of your Medicare premium is determined each year using a benefit formula from the 1997
Balanced Budget Act which set the premium at 25% of the total program costs. In other words, the Part B
premiums are calculated by dividing 25% of the actual cost of care and administration of the plan by the
number of projected participants in the program. The remaining 75% of program costs are financed
through general revenues.

Those with a modified adjusted gross income over $85,000 if you are single and $170,000 if you are
married are assessed on income-related threshold adjustment and pay a higher premium for Medicare
Part B. In addition, the premiums you pay for Medicare Part B are determined based on your income two
years prior. For example, if you are enrolling in Medicare Part B for the first time in 2019, your income
thresholds will be based on the income reported on your 2017 IRS tax return. If your income has gone
down since that time, you may request a reduction in the income-related threshold adjustment by
completing a form SSA-44 available from the Social Security Administration.

In 2019, the standard Part B premium will be $135.50. You will pay this amount if:

You enroll in Medicare Part B for the first time in 2019, and
You were not already receiving Social Security benefits at the end of 2018, and
Your income falls below the lowest threshold in the table below.

Analysis completed by Ben Gurwitz at Financial Life Advisors | 23

2019 Part B Premiums

If you are Married filing If you are Married but

If you are Single with a Your Medicare Part B
jointly and have a filing separately
Modified Adjusted premium per person
Modified Adjusted and have a Modified
Gross Income of: will be:
Gross Income of: Adjusted Gross Income of:

$85,000 or less $170,000 or less $85,000 or less $135.50

$85,001 - $107,000 $170,001 - $214,000 $189.60

$107,001 - $160,000 $214,001 - $320,000 $270.90

$160,001 - $214,000 $320,001 - $428,000 $85,001 - $129,000 $352.20

More than $214,000 More than $428,000 More than $129,000 $433.40

(These amounts are for 2019 only, and apply only to those who meet the criteria in the prior section of this
report.)

If you are already collecting Social Security benefits at the time you begin Medicare coverage, your
premiums will be automatically deducted from your Social Security payment each month. If you are not
receiving Social Security benefits, you must pay your Medicare premiums by check, credit card or
automatic draft from a bank account.

You can find additional information about Medicare and its associated coverage at [Link].

INCORPORATING LONG-TERM CARE INTO RETIREMENT

PLANNING

The health-related costs we included in this report do not include costs you may incur for long-term care,
and Medicare does not pay for most long-term care needs. Not everyone will need long-term care, but the
longer you live, the greater your chances of needing some sort of assistance with daily activities.
Additionally, specific medical conditions can increase your need for long-term care.

There are four basic types of long-term care:

Remaining at home and hiring a service for household or care-related tasks—or asking family and
friends to help out.
Adult day services facilities that provide respite care for seniors, as well as support services for
families.
Assisted living facilities which are residential facilities that offer healthcare and personal services.
Skilled nursing facilities that provide around the clock medical and personal care to residents.

Many people rely on family for care, most often for short-term care needs. Others are able to combine
help from a service, part-time nurse, and/or adult day center to reduce the costs of long-term care or to
delay the onset of full-time care.

Analysis completed by Ben Gurwitz at Financial Life Advisors | 24

According to the U.S. Department of Health and Human Services Administration on Aging, the average
annual expenditures for long-term care across the United States in 2016 were:

Average Annual Expenditures for Long-Term Care

Adult Day Services (5 days per week, 52 weeks) $17,680

Assisted Living Facility (private one-bedroom, 52 weeks) $43,435
Home Health Care -- Homemaker Services (42 hours per week, 52 weeks) $43,680
Home Health Care -- Home Health Aide (42 hours per week, 52 weeks) $44,772
Nursing Home -- Semi-Private Room (365 days in residence) $82,125
Nursing Home -- Private Room (365 days in residence) $92,345

It’s critical to plan for long-term care needs, even if you don’t expect to have them. Of course, your first
defense is to remain healthy as long as possible. In addition, you should begin to consider your
opportunities for securing care, such as:

Family and friends;

Self-funding from your savings;
Purchasing long-term care insurance;
Purchasing a life insurance policy with a long-term care rider;
Moving into a continuing care facility where you can transition from independent living into a skilled
nursing facility at the appropriate time;
Securing a reverse mortgage or home equity loan as a last resort.

PLANNING FOR HEALTHCARE IN RETIREMENT

While the numbers related to healthcare in retirement can be shocking, it’s important that you begin to
plan as early as possible. Now that you have an idea of the costs you can expect over your retirement
horizon, you can begin taking a few steps in preparation:

If you haven’t already, commit to a healthy lifestyle. Moderate amounts of exercise and modest
changes in eating habits can turn into significant health benefits.
Discuss healthcare costs with your financial professional. These costs should be a part of your
retirement income and spending plan.
Prepare for unexpected expenses by setting aside savings dollars for potential healthcare needs.
Do your homework. Learn what Medicare plans cover, as well as available resources in your
community that can help you save on costs.

Analysis completed by Ben Gurwitz at Financial Life Advisors | 25

CASE STUDY: THE IMPACT OF STARTING DATE ON OTHER
ASSETS

Choice of starting date can affect portfolio longevity. As we've demonstrated in the information in this
Social Security analysis, the amount of your Social Security benefit can be significantly impacted by
controllable factors. This case study illustrates the additional longevity that is possible by judiciously
choosing the date you begin Social Security benefits. The case study assumes Mary, a 62-year-old single
individual, retires from work in January 2010. Mary has $600,000 in a 401(k) and wants to know how long
her financial portfolio may last if she spends $38,000 after taxes in the first year and an inflation-adjusted
equivalent amount each year thereafter. She will follow one of five strategies that vary only in the date
that she begins Social Security benefits, and the outcome of each is depicted in the graph below.

In Strategy 1, Mary begins benefits at age 62, and her portfolio runs out of money at the end of 2039. The
Strategy 1 line is the highest in the early years but it runs out of money before the others. In Strategies 2
through 5, Mary begins Social Security at, respectively, ages 64, 66, 68, and 70. The Strategy 5 line is the
lowest line in the early years but it runs out of money last. By delaying the start of Social Security benefits
until 64, 66, 68, or 70, she can extend the portfolio's longevity by, respectively, 1+, 3+, 6+, or 9+ years,
where 1+ indicates that the portfolio provides full funding for one more year plus part of a second. Thus,
beginning benefits at 70 instead of 62 extended the portfolio's longevity by more than nine years.

This case study assumes the assets earn 5% per year with inflation at 3% per year. The individual begins
retirement on her 62nd birthday at the beginning of 2010. Her Primary Insurance Amount is $1,500 and
her Full Retirement Age is 66. This example assumes each year's taxes are based on current tax brackets,
standard deduction amounts, personal exemption amounts, and a deduction amount for being 65 or over,
all adjusted each year with inflation. It uses the three IRS formulas to calculate the taxation portion of
Social Security benefits. It is for illustrative purposes only and does not constitute advice.

Analysis completed by Ben Gurwitz at Financial Life Advisors | 26

Important Disclosure

The Balanced Budget Act of 2015 created changes to the rules of Social Security. These rule changes, as
interpreted by Social Security Solutions, Inc., have been implemented in the software that produced this
report. However, it remains possible that there will be additional changes to the rules and to the software
at a later date. You should not proceed with any claiming strategy without seeking advice from a qualified
financial professional.

This report is for informational purposes only. All the information provided is based on Social Security
rules, benefit calculations, and payout promises of existing Social Security policy at the time this report
was printed. The purpose of the report is to educate and give general guidance to help craft a personalized
approach to taking Social Security.

The Social Security claiming strategy highlighted in this report was generated based on information you
provided. That information included estimates of your and, when applicable, your spouse's Primary
Insurance Amount, life expectancy(ies), and date(s) of birth. If this information you provided, including
your life expectancy projection(s), should prove wrong after the fact, then the primary strategy may not be
the best strategy after the fact. Before selecting this or any other claiming strategy, you should analyze
and compare it with other scenarios generated by your financial professional. The optimal strategy for a
specific client depends, in part, on that client's tradeoff between the goals of maximizing expected lifetime
benefits and minimizing the risk of outliving his or her financial assets. As such, it is ultimately the
responsibility of the client to carefully consider the primary strategy before adopting it as his, her or their
own. This report should be used only as a general guideline and not as the ultimate source of information
about Social Security claiming strategies.

This report was created using software developed by Social Security Solutions, Inc. Social Security
Solutions, Inc. shall have neither liability nor responsibility to any person or entity with respect to any loss
or damage caused, or alleged to be caused, directly or indirectly, by information contained in this report.

This report and the analysis here within are based on certain assumptions selected by the financial
professional who produced this report using our software about future economic conditions and events
that may not turn out to be correct. The analysis in this report assumes the average wage growth will
follow the predictions laid out in 2014 Intermediate, a cost of living adjustment in the amount of 0.0
percent will be given each year in the future, and future dollar amounts are discounted at a rate of 0.0
percent. Social Security Solutions, [Link] under no obligation to update such written statements if
conditions change or unexpected occurrences happen to affect the report afterwards.

Analysis completed by Ben Gurwitz at Financial Life Advisors | 27