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When it comes to Social Security, what you don’t know can cost you.

And the amount it can remove from your pockets is tangible, according to a survey from Financial Engines released in March. For instance, a married couple can lose $250,000 in benefits over the course of their lifetimes if they use the wrong claiming strategy. For individuals, the difference could be $100,000.1

Just remember, the smartest claiming strategy for one person or couple may not be the best for another. Social Security lies at the heart of most retirement plans, so gaining a sound understanding of its basics is imperative. Consulting with a financial professional is never a bad idea.

To keep things simple, we’ll address a few of the more frequent misconceptions we read and hear about Social Security. So when it’s time for you to devise your own retirement income strategy, you’ll have a better idea what role Social Security plays and the questions you should ask.

Myth 1. “Social Security is going broke.”

Reality: Not quite. Social Security continues to run a surplus. When you combine its three

revenue streams – payroll tax revenues, interest on its bond portfolio, and income tax on paid Social Security benefits – it projects to run a surplus until 2020.2

But Social Security payments are exceeding tax revenue. Social Security reserves will provide full benefit payments until 2033, according to its most recent projections. After 2033, tax

revenue alone will provide about 75% of the funds needed to pay benefits.2

Between now and then, it’s up to politicians to close the gap and build reserves. The most obvious options appear to include increasing its revenue, or cutting its benefits, or increasing the retirement age, or a combination. Stay tuned.

Myth 2: “I should take benefits as soon as I can.”

Reality: Maybe. Maybe not. It’s true that at 62 you can claim benefits. They’ll grow about 8% a year for every year you wait to collect until you turn 70.3

But waiting isn’t always best. Consider, will you live long enough to make waiting worthwhile? Do you have adequate savings to postpone benefits?

Myth 3: “You don’t pay income tax on Social Security benefits.”

Reality: Sorry. That’s wrong. You don’t pay income tax on all of your benefit, but between 50% and 85% of it can be taxed,3 depending on your modified adjusted gross income and your state of residence.4 Consult ssa.gov or your advisor to learn what you will owe.

Myth 4: “If I’m still working, I can’t collect benefits.”

Reality: Oh yes you can, but they might be reduced.5

If you file for benefits and you’re younger than full retirement age, $1 will be withheld for every $2 you earn above $15,480 in 2014.

If you file in the year you reach full retirement age before the month of your birthday, you’ll be docked $1 for every $3 you earn above $41,400. Starting with the month you reach full retirement age, you can collect your benefits with no limit on your earnings.

Myth 5: “If my spouse earns more than me, I should collect benefits based on their record.”

Reality: No. Spousal benefits only pay up to 50% of what your better half will collect. If you’ve been a nonworking or low-earning spouse, it might make sense. Otherwise, you’ll probably be better off on your own. The SSA will automatically pay the larger of your own or your spouse’s benefits.6

Fact or fiction: Separating Social Security myths from realities

Neither Transamerica nor any of its financial professionals provide tax or legal advice. You may want to talk to a tax/legal advisor before making your final purchase decision.

Transamerica Resources, Inc. is an AEGON company and is affiliated with various companies which include, but are not limited to, insurance companies and broker-dealers. Transamerica Resources, Inc. does not offer insurance products or securities. This material is provided for informational purposes only and should not be construed as insurance, securities, ERISA, tax or investment advice. Although care has been taken in preparing this material and presenting it accurately, Transamerica Resources, Inc. disclaims any express or implied warranty as to the accuracy of any material contained herein and any liability with respect to it. Interested parties must consult and rely solely upon their own independent advisors regarding their particular situation and the concepts presented here.

Securities are not insured by the FDIC or any federal government agency. May lose value. Not a deposit or guaranteed by any bank, bank affiliate or credit union.

AQNLSS0414

Second Quarter Newsletter 2014

Transamerica.com

IN GOOD HEALTHEncore Careers

Page 3

FUTURE OF ‘FILE AND SUSPEND’

Turning into hot topicPage 4

SOCIAL SECURITY TIPSCollecting benefits while

living abroadPage 4

A married couple can lose $250,000 in benefits over the course of their lifetimes if they use the wrong claiming strategy

2

SOCIAL SECURITY BRIEFLY

Face Reality with Confidence

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Collection of past overpayments stopped

The Social Security Administration (SSA) stopped a program in April that seized tax refunds from thousands of people in order to recoup Social Security overpayments that occurred more than 10 years ago.7

Acting SSA commissioner Carolyn W. Colvin stopped the program and asked the agency to conduct a review. Social Security recipients had complained to Congress that some were being forced to repay overpayments that went to their parents when they were children.

The SSA identified about 400,000 people with old debts totaling $714 million. The SSA said it has collected $55 million through the program.

There are different scenarios in which people may have received overpayments as children. In one, when a parent of a minor child dies, the child may be eligible for survivor’s benefits, which are typically sent to the surviving parent or guardian.

If an overpayment was made on behalf of the child, he or she could be liable as an adult.

Another occurs when a disabled child receives overpayments. Those overpayments, once discovered, could be subtracted from current payments.

White House drops controversial chained CPI proposalThe White House will not pursue the so-called “chained CPI,” which would have adjusted the inflation formula used to determine future cost-of-living adjustments (COLA) in Social Security checks.8

The announcement was made in February.

Some economists had said chained CPI (consumer price index) was a more accurate way to measure inflation because it corrects for biases in more widely used measures. It

assumes consumers will substitute what they usually buy – like steak – with a similar but lower priced item – like hamburger meat – when the price of steak climbs.

On average, chained CPI was expected to decrease the rate of the

current CPI measure by 0.25% to 0.3%, and it would have decreased future COLAs.

New expedited disability process awaits veteransThe SSA unveiled in February an initiative to expedite disability claims from veterans with a Department of Veterans Affairs (VA) disability compensation rating of 100% permanent and total.9

The SSA will treat applications from these veterans as high priority and issue expedited decisions.

To receive the expedited service, veterans must tell the SSA they have a VA disability compensation rating of 100% permanent and total and show their VA Notification Letter as proof of their disability.

Applying for same-sex marriage benefits

The SSA encourages anyone who’s a surviving spouse of a same-sex marriage or other legal same-sex relationship to apply. Call 800-772-1213 or visit http://www.ssa.gov/people/same-sexcouples/.

The SSA announced in December that it had begun processing claims for some retirement, lump-sum death and surviving spouses of same-sex marriages and paying benefits when they’re due.

Suspicious of fraud

Anyone who believes they may be the victims of Social Security payment fraud should contact the Office of the Inspector General’s (OIG) fraud hotline at 800-269-0271, or visit http://oig.ssa.gov/report-graud-waste-or-abuse.

To help keep your identity safe, be aware of suspicious correspondence and safeguard your personal information, including your Social Security number. Be wary of when and to whom you provide personal information, and only do so when necessary. Avoid websites that look suspicious.

The SSA encourages anyone who’s a surviving spouse of a same-sex marriage or other legal same-sex relationship to apply.

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The Social Security Administration (SSA) continues to encourage current and future recipients to set up online accounts at My Social Security to receive information about their benefits and earnings history. But paper statements will make a partial comeback.

In September, the SSA will resume mailing paper statements to workers who have yet to register for online statements. The statements will be mailed to workers at ages 25, 30, 35, 40, 45, 50, 55 and 60. The SSA discontinued most paper statements in 2011 to save money – about $70 million a year.13

Critics of online statements have contended paper statements provide important reminders of what they can expect to receive in the future. As of April, only 10 million Americans, or 6% of all workers, had signed

up for online statements. Critics also note those workers who are most likely to be reliant upon Social Security in retirement are the ones that are least likely to have Internet access.

Annual statements include estimates on monthly benefits. It also explains how benefits are calculated and details the history of income that’s subject to Social Security tax.

The SSA bills online accounts as a “valuable source of information” for workers.14

If you’re already receiving benefits, your online account will enable you to get your benefit verification letter; check your benefit and payment information and your earnings record; change your address and phone

number; and start or change direct deposit of your benefit payment.

If you have yet to start receiving benefits, your online account lets you review estimates of your retirement, disability and survivors benefits; see your earnings record; and see the estimated Social Security and Medicare taxes you’ve paid.

Setting up the account requires providing personal information about yourself that only you are likely to know. To protect your privacy, you’ll create a username and password to access your account.

Benefit verification letters can be accessed online through a My Social Security account, or you can call (800-772-1213) to request one by mail.

Paper statements to make a comeback, but with a catch

IN GOOD HEALTH

Some call them “encore careers.” Others say “encore entrepreneurs.” We call it opportunity.

According to AARP, the idea started way back in 1997, when a San Francisco-based nonprofit called Civic Ventures – later renamed Encore.org – introduced the concept. In recent years, it’s gained momentum.

An estimated 9 million Americans between the ages of 44 and 70 are working in a second career, and another 31 million Americans want to pursue one. A survey from the MetLife Foundation and Encore.org revealed that within 10 years, 25% of Baby Boomers hope to start a business or a nonprofit. Half of these people hope to

make a difference in the world while earning a paycheck.10

Whether it’s by need or desire, Baby Boomers are working longer. The share of full-time workers who are 55 years old or older climbed to 21% in 2013. That was up from 17% in 2008 and 12% in 2000.11

Apparently, more plan to work. A new survey from the Employee Benefit Research Institute said 65% of workers plan to work for pay after they retire, but only 27% actually do.12

So what’s your passion? If you’re going to embark on a second career, it’s an opportunity to choose something you want to do. It could be a hobby you left behind years ago, or one you recently discovered.

The trick in many instances is finding the encore career that suits you, because many simply don’t know what that is. Sometimes

discovering it takes time, and then more time, not to mention money.

Here are a few suggestions to get started:

• Start talking: Meet with people you know in a field that piques your curiosity. Buy them lunch and ask questions. Let them talk about themselves.

• Tap local resources: Many colleges are offering training and retraining for paid and volunteer work. And cities such as San Francisco, Phoenix, Denver, Philadelphia, Portland, Ore., Minneapolis and Boston work with local businesses and organizations to find ways to employ Baby Boomers.10

• Research: What fields have a growing demand?

• Be patient: If you need to acquire new skills, get them. But make sure your finances are in order, and your health is too.

Encore careers provide new options to consider

Many retirees embracing the idea of pursuing a passion as a job later in life.

Websites for ideas/opportunities:

• AARP.org/startabusiness• Encore.org• Idealist.org• Createthegood.org• Volunteermatch.org• Lifereimagined.aarp.org• RetiredBrains.com• Workforce50.com

A Few Ideas …

Possible Nonprofit Jobs:10

• Health care• Environment• Animal Welfare Groups

Great Part-Time Jobs

• Retail• Bookkeeping• Tax preparation• Personal assistant• Tour Guide• Driver• Translator and interpreter• Handyman

Jobs to Ride the Age Wave

• Health care aide• Patient advocate• Home modification pro• Senior fitness trainer• Move manager• Dietitian/nutritionist• Retirement coach• Financial planner

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SOCIAL SECURITY TIPS

Yes, you can live outside of the United States and collect Social Security benefits. Lots of people do.

The Social Security Administration publishes Your Payments While You Are Outside The United States, which details everything you need to know if you or a loved one lives, or plans to live, abroad and intends to collect

benefits. We’ve summarized a few of its key points here:

• “Outside of the U.S.” means not in one of its 50 states, the District of Columbia, Puerto Rico, the U.S. Virgin Islands, Guam, the Northern Mariana Islands or America Samoa.

• Once you’re outside the country for 30 days in a row, you’re considered outside of the country. You remain in that status until you return and stay in the U.S. for 30 days in a row.

• If you’re a U.S. citizen, you may receive your benefits while outside of the country for as long as you’re eligible.

• Benefit payments cannot be sent to people in Cuba or North Korea, and

there are limiting restrictions for people in a few other countries. The lists of countries are subject to change. Access Your Payments While You Are Outside The United States for the most recent lists and information about exceptions.

• As a dependent or survivor, special requirements affect your right to collect benefits while you’re outside of the U.S.

• You must report to Social Security certain events, such as a change of address, work outside of the U.S., marriage, divorce, disability change and more.

Additional tips on Unlocking Social Security are available at Transamerica’s New Age of Advice (log-in required).

Collecting benefits while living abroad

72% of U.S. adults are counting on Social Security to make up half of their retirement savings3

27% of retirees report working for pay12

29% of U.S. adults say Social Security will comprise three-quarters of their retirement income3

69% projected ratio of retirement health care costs to Social Security benefits for a couple retiring in 201519

98% projected ratio of retirement health care costs to Social Security benefits for a couple retiring in 202419

2.9 million Americans applied for Social Security disability benefits in 201018

2.6 million Americans who applied for Social Security disability benefits in 201318

65% of workers say they will work for pay after they retire12

BY THE NUMBERS

The rumors are back. Only this time, they aren’t mere rumors.

Found on page 150 of President Obama’s $3.9 trillion budget proposal for fiscal year 2015 is a sentence that casts doubt over the future of a useful Social Security claiming strategy.

It says: “The budget proposes to eliminate aggressive Social Security claiming strategies, which allow upper-income beneficiaries to manipulate the timing of collection of Social Security benefits in order to maximize delayed retirement credits.”15

According to Reuters.com, the proposed budget aims to end the file-and-suspend claiming strategy.16 The White House believes the claiming strategy is being “manipulated” in a way that creates an unfair advantage for high-income seniors who don’t need the benefits as much as others, and it wants to end the strategy because of its added cost to Social Security.16

Here’s an example of how file-and-suspend works:

• Both spouses in a couple are 62. The spouse who earned less over a lifetime of work files for reduced individual benefits.

• When both reach full retirement age at 66, the spouse who earned more money files for benefits and then immediately suspends them. This move allows the benefit to grow, while the lower-earning spouse collects a spousal benefit in addition to an individual benefit.

• At 70, the higher-earning spouse begins taking benefits that have grown by 8% a year for four years.

A growing number of financial planners are recommending their clients use the strategy, which allows married couples to receive some benefits while they wait to collect more

at a later date. Research from the Center for Retirement Research at Boston College shows that 46% of file-and-suspend benefits go to the top 40% of households. The SSA does not have data to show its cost to the system.16

There were reports in April 2013 indicating Social Security’s looming shortages could jeopardize the strategy.17 But while an end to file-and-suspend seems possible, it’s not imminent.

As Reuters.com noted, any change or elimination would require congressional action, which means we shouldn’t expect anything soon.16 And InvestmentNews.com reported the strategy can be used by any clients, including unmarried individuals, to lock in a filing date for benefits. It allows them to change their mind about delaying benefits and request a lump sum payout back to the suspension date in lieu of delayed retirement credits.15

Future of ‘file and suspend’ turning into hot topic

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1”Huge gap in public’s knowledge of Social Security rules,” by Mary Beth Franklin, www.investmentnews.com, 3/11/2014.

2”Top 5 Social Security Myths,” by Andy Landis, www.marketwatch. com, 4/16/2013.

3”5 Myths About Social Security Busted,” by Brian O’Connell, www.thestreet.com, 11/1/2013.

4”State-by-State Guide to Taxes on Retirees,” Kiplinger.com, 8/2013.

5”Retirement Planner: Getting Benefits While Working,” SSA.gov, accessed 4/16/2014.

6”Ask Carrie: 10 Myths and Misunderstandings About Social Security,” by Carrie Schwab-Pomeranz, Parade.com, 10/7/2013.

7”Social Security halts effort to collect old overpayments,” by Stepen Ohlemacher, the Associated Press, DenverPost.com, 4/15/2014.

8”Obama drops controversial Social Security proposal,” by Jeanne Sahadi, CNN.com, 2/20/2014.

9”Social Security Announces New Expedited Disability Process for Veterans,” Social Security News and Announcements, 2/19/2014.

10”Ready for Your Second Career?” by Sally Abrahams, AARP Bulletin, 10/2013.

11”Job Picture Improves for Boomers Launching Second Acts,” CNBC.com, 5/3/2013.

12”Building a successful 2nd career near retirement,” by Nanci Hellmich, USA Today, 3/19/2014.

13”U.S. Social Security to resume benefits statement mailings,” by Mark Miller, www.reuters.com, 4/19/2014.

14“my Social Security – Sign In Or Create An Account,” ssa.gov, accessed on 4/21/2014.

15”File and suspend won’t be suspended … just yet,” by Mary Beth Franklin, www.investmentnews.com, 3/31/2014.

16”’File-and-suspend’: A Social Security strategy under fire,” by Mark Miller, www.reuters.com, 3/25/2014.

17”Time is running out for Social Security’s “file and suspend,” by Robert Bloink and William H. Byrnes, lifehealthpro.com, 4/29/2013.

18”Has Social Security Disability Enrollment Hit Plateau?” by Damian Paletta and Josh Zumbrun, blogs.wsj.com, 4/16/2014.

19”Average retiree health costs could overtake Social Security benefits,” by Mary Beth Franklin, investmentnews.com, 4/17/2014.

WORKS CITED

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This material should be regarded as educational information on social security and is not intended to provide specific advice. If you have questions regarding your particular situation, please contact your legal or tax advisors.

Transamerica is prohibited by law from providing tax or legal advice. As required by the IRS, we inform you, that this material was not intended or written to be used, and cannot be used, to avoid penalties imposed under the Internal Revenue Code. This material was written to support the promotion or marketing of the products, services, and/or concepts addressed in this material. Anyone to whom this material is promoted, marketed, or recommended should consult with and rely solely on their own independent advisors regarding their particular situation and the concepts presented here. Transamerica.com