How to Help Clients Make the Most of Social Security

Miller indicated that while he has always thought that Congress would come together before 2033 to solve the issues facing the trust fund, he’s beginning to doubt this with the current state of political polarization.

Test the effect of a benefit cut.

Benz asked how financial advisors with younger clients should plan for the possibility of benefit cuts in the future.

Franklin said that if she were an advisor with clients 55 or younger, she would stress test their Social Security claiming strategies, including reducing the overall amount by as much as 20%.

Help clients understand when they’ll break even on delayed claiming.

Franklin also discussed the fixation many retirees looking at Social Security have on break-even age. A client who claimed Social Security benefits at full retirement age instead of 62 would break even around age 78, while the average life expectancy is around 85. A retiree who waited until 70, the maximum claiming age, would break even around age 83, she said.

Confusion reigns.

Miller pointed out that the phrase full retirement age is somewhat opaque and confusing to many people. He still wishes that everyone still received a paper statement of their benefits each year as they did up until 10 years ago. He encourages everyone to create an online Social Security account in order to be able to access their benefit information and to be sure their account is not grabbed by a scammer.

Both Franklin and Miller discussed how the recent large cost-of-living adjustments are misunderstood in that clients who are older than 62 will still receive the benefit even if they delay claiming. They also discussed how claiming early results in permanent benefit reductions and the issues surrounding beneficiaries who have earned income prior to their FRA.

Timing is everything.

Franklin raised an important point for advisors. Clients should be responsible for filing for their own benefits with SSA either in person, over the phone or online. “But the strategy of when your clients should claim social security benefits, that’s your job. And I think it really plays into this more holistic view of financial planning. Investing is just one small portion of it.”

Franklin discussed the potential merits of having the higher earning spouse wait until 70 or close to it to claim their benefit to create the largest survivor’s benefit for the lower earning spouse. She also indicated that the lower earning spouse might consider claiming their benefit as early as 62 to bring some additional cash into the household.