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Count Social Security among the myriad retirement issues that underscore the need for pre-retirees to engage registered investment advisors.
First, there’s the obvious question of whether or not a client should claim benefits at 62 years old – the earliest possible age to do – or delay as long as possible to earn higher monthly checks. By waiting until 70 years old – the latest age at which to claim – a recipient draws the maximum allowed benefit depending on taxes contributed during their working years.
That decision is, to put it mildly, a big deal because as the Social Security Administration (SSA) notes, someone born in or after 1960 that would receive a maximum benefit of $1,000 per month would trim that amount to $700 by opting to claim at 62 years old.
Claiming age is just one example of the need for knowledge and thoughtful planning when it comes to helping clients make the best Social Security decisions and data confirm they need the help of advisors.
Some Concerning Social Security Signs
Advisors, consider the following. The Nationwide Retirement Institute’s eleventh-annual Social Security survey indicates that half of the 1,800 people polled don’t know what percentage of their retirement income Social Security will represent.
One interpretation of that data point is that many clients don’t know what they’re eligible to receive. As of the start of 2024, the maximum monthly benefit a person can receive is $4,873, according to SSA. That’s assuming they were a high earner and waited until 70 years to claim. Chances are many clients don’t know this or that their Social Security benefits are calculated by their 35 highest earning years, adjusted for inflation. Point is there plenty of important logistical details for advisors and clients to discuss regarding Social Security.
Then there’s the often discussed issue of the program’s future solvency. On July 29, the U.S. national debt hit an all-time high of $35 trillion. That’s more than 11 Microsofts so it’s understandable that clients are concerned about Social Security potentially going belly-up. Data confirm that’s how they’re feeling.
“Most Americans are aware of the issues surrounding Social Security’s future. Around 3 in 4 adults (72%) worry about Social Security running out of funding in their lifetimes, and nearly 4 in 5 (79%) agree that the program needs to change,” adds Nationwide.
Is it possible that Social Security benefits will be cut in the future? Yes. Is it likely? Probably not because politicians like being reelected. Of course, advisors don’t possess crystal balls and they can’t speak to either point with 100% certainty. What they can do is present clients with sound plans and action ideas in the essence of preparing the possibility of a cut that may never materialize.
Age Is a Vital Number
The point about age as it relates to claiming Social Security needs to be reiterated because it’s absolutely crucial. Advisors that instill the value in “claiming procrastination” upon clients are likely to be rewarded with higher levels of client satisfaction.
“Many people don’t consider the long-term impact of claiming Social Security early, or they may not know their monthly benefit can be as much as 80% higher if they don’t file at the earliest eligibility age and delay filing until age 70,” concludes Nationwide.
Obviously, that 80% isn’t linear for all recipients, but not all clients know about the value in waiting. Point is the value is tangible and advisors should highlight it.
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