Estimated reading time: 3 minutes, 1 second

Turn Soc Security Into a Plus for Your Firm

An estimated 7,000 Americans will turn 65 years old every day during the next 17 years, according to the American College of Financial Services.

The statistic can seem alarming because it means a massive number of Baby Boomers will need to shift from accumulating assets to drawing down their savings in order to generate retirement income. This, of course, can be troubling for financial advisors who have worked hard over the years to build their book of business by helping Boomers grow their retirement savings.

Yet, the statistic also points to a growing opportunity for financial advisors. Retirees in record numbers will need to generate income, which often involves maximizing Social Security benefits. The government program, of course, isn’t intended as a sole source of retirement income, but it can still play a substantial role after clients clock out from their careers. Indeed, the Employee Benefits Research Institute estimates Social Security, on average, accounts for 38.2% of income for people over age 65.

The challenge for advisors and their clients is to navigate complex Social Security rules to insure that maximum benefits are received. Simply put, advisors who aren’t able to help with that task may be at a competitive disadvantage compared to other financial professionals who are expanding their services to include helping clients with Social Security. In some cases, advisors actively promote their Social Security consulting services when pursuing potential clients.

A few examples illustrate the challenges of maximizing Social Security benefits. The full retirement age for Social Security is 65, yet individuals who begin collecting benefits at 62 will see their monthly payment reduced by 24%.

Conversely, individuals who delay collecting benefits beyond 65 will see their payments increase 8% for each year that they wait to tap the program up until age 70. Delaying retirement seems appealing because the 8% growth in benefits is considerable, especially when compared to the typical returns for conservative investments that are appropriate for retirees.

Yet, clients need to balance the merits of higher monthly payments with longevity expectations. While it’s impossible to forecast the timing of our ultimate demise, clients in poor health may want to tap Social Security at a younger age while others may wish to delay collecting benefits.

Managing spousal benefits is another complicated matter. For example, if one spouse is at full retirement age, the younger spouse can file for a spousal benefit. In this scenario, the older spouse would complete a file-and-suspend claim, which means the older spouse doesn’t receive any benefits. It does allow the older spouse’s eventual payments to grow at the annual 8% rate.

When the younger spouse reaches his or her full retirement age, the individual can then file for their own retirement benefits, assuming that their payments will be higher than those received under the spousal program. Various strategies also exist for widows to maximize payments under their late spouses’ retirement benefits.

With the complexity of Social Security in mind and the growing demand for professional advisory services regarding the program, a variety of organizations have developed training and certification programs for individuals seeking to offer retirement consulting. The American College of Financial Services, for examples, offers the Retirement Income Certified Professional.

The program includes a variety of income retirement topics, including Social Security strategies. Candidates for the certification must have three-years of related work experience. The National Social Security Association also offers training programs for advisors seeking to strengthen their consulting skills.

A large assortment of books on the topic is also available, including “The Advisor’s Guide to Social Security: Unlocking the Mystery of Retirement Planning” and “Social Security and Medicare: Advanced Analysis of the Tactics, Taxes, and the Truth.”

Read 16724 times
Rate this item
(0 votes)

Visit other PMG Sites:

PMG360 is committed to protecting the privacy of the personal data we collect from our subscribers/agents/customers/exhibitors and sponsors. On May 25th, the European's GDPR policy will be enforced. Nothing is changing about your current settings or how your information is processed, however, we have made a few changes. We have updated our Privacy Policy and Cookie Policy to make it easier for you to understand what information we collect, how and why we collect it.