Updated Pru report out on Social Security strategies

Nov 25, 2012 @ 12:01 am

There is nothing I enjoy more than sitting around with a bunch of smart people discussing my favorite topic: strategies for claiming Social Security.

I had a chance to do so last Monday with a stellar panel of experts at the Newseum in Washington.

The event unveiled an updated report from Prudential Financial Inc. outlining the options and strategies individuals can use to maximize lifetime Social Security income. In the 2012 version, author James Mahaney, vice president of strategic initiatives at Prudential, focuses on important claiming strategies for divorced and widowed people, and pulls back the curtain on the perplexing ways Social Security benefits are taxed.

I have enormous respect for his work. In fact, it was Mr. Mahaney's research that sparked my interest in Social Security-claiming strategies several years ago.

What is the biggest fear of today's retirees? Running out of money.

What can Social Security offer? Guaranteed income for life that increases over time.

It seems like a match made in heaven. Yet 70% of retirees continue to claim Social Security benefits before their full retirement age, even though their benefits will be reduced for life.

Claiming reduced benefits early is just one of the four biggest mistakes that many retirees make regarding Social Security. The others are underestimating the real value of Social Security, not understanding the ways married couples can integrate benefits, and getting blindsided by the tax torpedo as it applies to benefits.

I will be writing about these issues in coming weeks, but I want to give our readers a heads-up about this terrific report and companion video on the Prudential home page (prudential.com).

If financial advisers do nothing else, they should watch the brief video and tell their clients about it. It will go a long way toward educating them about the true value of Social Security benefits as part of a coordinated retirement income strategy.

As Mr. Mahaney wrote in his paper: “No other vehicle can match the combination of inflation-fighting increases, longevity protection, investment risk elimination and spousal coverage as Social Security can, potentially making it one of the most valuable sources of retirement income.”

Advisers who educate themselves about this important resource will go a long way toward winning the loyalty of their existing and potential clients. And when clients are more confident about their guaranteed sources of retirement income, they may be more inclined to invest the rest of their assets with their advisers.

mbfranklin@investmentnews.com Twitter: @mbfretirepro

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