Many Financial Advisors are not Telling Clients the Advantages of Waiting to 70 to Collect Social Security
This article originally ran as "Social Security: Key Piece of Your Clients' Retirement Plans," in the current issue of the magazine Bank Investment Consultant
Over the past 77 years since Social Security was passed into law, it has paid out more than $11 trillion in benefits to well over 100 million people— the elderly, the disabled and surviving children of deceased parents. And despite rumors of its demise, it will continue to be a portion of many people’s retirement income. And it’s not just for the 75% of the country that has less than $30,000 in retirement savings. It will be a factor for the middle class as well, as Social Security benefits could represent a retirement benefit of $20,000 to $30,000 a year (or double that for a professional couple).
Still, many financial advisors know precious little about the program and how it operates. Or how to maximize benefits for their clients. Many pay scant attention to Social Security in analyzing clients’ full financial pictures.
For the last four years, Rob Kron has been working to change that. Director of advisor and client education at investment manager BlackRock, Kron has been attending conferences of financial advisors where he offers presentations explaining Social Security’s ins and outs. He points out that there are features like “file and suspend,” that can allow people to improve their benefits at no cost.
Say a married couple, both 66, have a primary earner who doesn’t want to retire. That person has the option of filing for Social Security, but suspending collection of any benefits. If the person continues to work and starts collecting benefits at 70, he or she still gets the maximum benefit amount, just as if he or she had filed at age 70. However, because they filed at 66, the lower-earning spouse became eligible immediately to start collecting one-half of the benefit amount of the spouse who filed.
Part of the problem, for advisors and their clients, is that there is a lot of misinformation circulating about the national retirement program, particularly as many of its critics, including some politicians, have spread false information, say market observers.
Some say the program is going bankrupt, but in fact it is fully funded through at least 2033, and could be viable even much, much longer with some minor fixes. Others say that people could do better investing their money privately, although the market’s whipsaw performance in recent years suggests otherwise.