Many investors view Social Security as an automatic, almost rudimentary part of retirement, but in reality, the program isn’t always so simple. As such, there’s significant opportunity for advisors to engage clients when it comes to boosting their Social Security knowledge.
In the wake of the coronavirus pandemic, now is an ideal time for advisors to initiate conversations with clients regarding Social Security. Most importantly of all, those are chats clients want to be having.
“The pandemic also affected Americans’ plans around Social Security. In our 2021 survey, one in five (19%) said they have reconsidered the timing of when they would file for Social Security, with 11% delaying or planning to delay benefits and 9% choosing to claim early,” writes Nationwide’s Tina Ambrozy. “Again, these percentages are down from 2020, when 28% of adults said COVID-19 altered their plans for claiming benefits. One year ago, 14% were looking at early filing and 11% were considering a delay.”
For advisors, one of the starting points in helping clients solve Social Security conundrums is understanding why some are altering retirement schedules.
“According to a May 2021 Federal Reserve study, 45% of current retirees said health problems, caregiving responsibilities or job changes pushed them to retire on a different schedule than they had wanted,” notes Ambrozy. “For retirees who find themselves in this situation, Social Security quickly becomes more important as a source of retirement income. Yet many people don’t have a basic understanding of how claiming Social Security benefits early can haunt them throughout retirement.”
Another area where advisors can add value for clients when it comes to Social Security is understanding some of the intricacies of how the system works. Many clients already know that Social Security benefits are determined largely by income, and while that’s true, many aren’t aware of the systems rules abyss and its related complexities.
“With over 2,700 rules for Social Security, it’s not surprising to encounter misconceptions among clients,” concludes Ambrozy. “The complexity of different retirement scenarios can increase the likelihood that they’ll slip up when deciding when to claim benefits. Their decision-making ability can also be clouded by unexpected events—and it doesn’t have to be extreme like a global pandemic.”
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The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.