Few advisors truly understand and implement Social Security planning into their practices. But the knowledge they can provide can make a big difference in a client’s overall retirement success. So, it’s important to get the facts and learn how you can start having discussions around Social Security with your clients.
Decisions around Social Security may be the most complex any client will face. When do I begin Social Security? What is the best election for my spouse? How can I coordinate with my spouse’s benefit? Can I maximize our benefits together? And how does all this work in conjunction with my retirement assets to make sure I don’t run out of income during my lifetime?
Here is the crux of the Social Security questions: The information and leadership we provide is critical to the retirement success of our clients; however, we don’t get paid by Social Security or on the income increase our advice provides. So why bother with it?
Because Social Security is that important to our client’s overall retirement success and our clients need the knowledge we provide. It makes a huge difference.
Here are some startling facts around Social Security (Source: Nationwide Retirement Institute 2022 Social Security Survey):
This is one of the pillars of retirement income planning for most Americans. And most people don’t have confidence that it will be there for them when they need it. Worse yet, our savings rate in the United States has fallen to less than 3% after the pandemic and our debt load is an all-time high. We are reaching the breaking point for many people near retirement.
But there is a bright side!
There has never been a better time to help so many Americans in need. And the consumer will need our services and expertise for decades to come. This just relates to Social Security and Income Planning not to mention the need to pass along trillions of assets to the next generation, manage assets through a potential recession and volatile markets, and continue to guide and create wealth.
But, having a vast understanding of Social Security is necessary to provide the best advice for clients in their retirement planning. You simply can’t make proper recommendations without having a command of the client’s Social Security strategies – regardless of income level.
According the Nationwide Retirement Survey, 66% of Americans want to sit down with their financial professional to talk about how to maximize income from Social Security. 54% want to know strategies of spousal protection available through Social Security. These are great topics for client meetings and potential seminars.
As I have traveled around the country the last 20 out of 24 weeks, I have heard a renewed interest in face-to-face prospecting like seminars. It’s great to have a sense of “normalcy”, whatever normal is these days. Clients seem to want to gather in larger groups these days as we are further and further away from the pandemic. It’s time to dust off those slide decks and work on presenting new ideas. Many people may be concerned about the economy; however, I would argue that their decisions around Social Security elections will likely have a larger return on retirement income that anything around asset allocation.
If you want to be impactful to your clients or prospective clients, providing education on Social Security options is more meaningful and desirable today than ever before.
That’s right. You don’t earn any revenue if your business model is tied to assets under management. However, making the proper decisions around Social Security can benefit your business model in three key ways.
No matter where I speak, I always am surprised at how few advisors truly understand and implement Social Security planning into their practices. It comes down to a variety of objections driven mainly by clients’ misunderstandings around the program.
Many clients tell our advisors they want to take their benefits as early as possible because they have worked their entire life and want to see the income as soon as possible. This makes emotional sense, not financial sense. The chances of dying between the ages of 62 to 70 are only about 8%, while the chances of living past age 90 are about 10%. You are more likely to live past 90 than you are to die before age 70. But we still want to take income early. The penalty for taking income early is about 76% of your age 70 maximized value. We need to reframe decisions around Social Security for our clients.
We also hear clients looking at their Social Security statements and focusing on their individual Full Retirement Age. For most clients, that will be age 67 going forward. Instead, we should think of Full Retirement Age as the age when we truly maximize the benefits of Social Security. I encourage you to start thinking about positioning the election for the highest level of income not as Full Retirement Age but age 70. That will increase the monthly benefit by 8% annually from Full Retirement Age, making age 70 the real full retirement age for retirees.
Finally, we need to coordinate with clients’ other income to bring clients into the conversation. Many clients want to know how to better use other streams of income to get into a position to maximize Social Security. This is a perfect segway from our discussions on asset growth and management to income.
Income is the most important outcome in retirement.
In fact, I believe we will be paid in the future for how well we manage the decisions that mitigate risks in retirement. Those decisions can be increasingly impactful for clients near retirement. Coordinating and making the proper decisions on Social Security plays an important role because it reduces pressure on assets, provides longevity protection and creates inflation-adjusted income…all in one major decision.
If you are ready to take the next steps in retirement income planning and want to have meaningful conversations around income in retirement, we are here to help. Palladium Group, backed by the Ash Brokerage Retirement Income Consultants and Specialists, are prepared to help you and your clients navigate the complexity of Social Security and income planning in general. Reach out to your Palladium Group team of experts and learn about the vast capabilities in this area. You can remain relevant with your clients and grow your practice at the same time.