Gaining Social Security expertise can make advisers clients’ allies

More and more, financial advisers are becoming experts in Social Security-claiming strategies, and their clients are better off as a result.

And for those who haven’t yet mastered the intricacies of this vital benefits program, there is no shortage of tools and training to bring them up to speed.

I sat in on two separate webinars last week designed to highlight the value of a smart Social Security-claiming strategy as part of an overall retirement income plan.

One webinar, featuring Michael Gracie, director of investment and retirement education for BlackRock Inc., was titled “Transforming Social Security into a Winning Retirement Strategy.” Aging baby boomers need new ways to manage and maximize their retirement income, he said.

“A smart Social Security-claiming strategy is one of the best ways to meet the needs of this new generation of retirees,” Mr. Gracie said.

The Social Security resources available on BlackRock’s website received high marks in a recent online survey of 600 advisers on practice management and support tools provided by product manufacturers and distributors.

The survey, conducted by consultants Practical Perspectives LLC, found that advisers want more tools and programs that can be used directly with investors, and prefer those that are “implementation-oriented” rather than theoretical or academic.

PRACTICAL ADVICE

That is the kind of practical advice that Frank Horath, principal of ClientFirst Financial, offers. His firm provides tools, training and marketing materials to help advisers incorporate Social Security-claiming strategies into their practices.

During last Wednesday’s webinar, Mr. Horath introduced participants to the latest version of Social Security Explorer, a software program available at a discount on his site (clientfirst.info).

Mr. Horath explained how conducting seminars for prospective clients on Social Security-claiming strategies can help advisers capture new business and create a pipeline for new assets.

Matt Cosgriff, a paraplanner with All Star Financial, can attest to the value of mastering Social Security-claiming strategies, both for his business and his clients. Over the past few weeks, I have been corresponding with him about one of his divorced clients whom he had advised to file for spousal benefits on his ex-wife’s earnings record when the client reached his full retirement age.

“The client went into the local Social Security Administration office to file for his divorced spousal benefits, and the SSA representative told him that he couldn’t collect divorced spousal benefits unless his ex-wife had passed away,” Mr. Cosgriff wrote.

That information was wrong. As long as an individual was married to the ex-spouse for at least 10 years and isn’t currently married, that person can file a restricted claim for spousal benefits if he or she waits until full retirement age. Meanwhile, the individual’s own retirement benefits will accrue delayed retirement credits worth 8% per year between 66 and 70.

At 70, an individual can switch to his or her own retirement benefit, which would be worth 132% of the benefit at full retirement age, plus intervening cost-of-living adjustments.

Luckily, the client asked the SSA representative to verify the information with his manager. The manager set the record straight and confirmed that the divorced man could in fact collect spousal benefits on his ex.

“It’s scary to think how many Americans might be leaving money on the table, not just because they don’t know the intricacies of Social Security but because they are getting incorrect info from the Social Security offices,” Mr. Cosgriff said.

In defense of SSA representatives around the country, the quality of information about these nuanced claiming strategies has been improving over the past few years. But the above example shows that not all of them get it right. That is even more reason why an adviser can be a valuable ally in a client’s quest to maximize Social Security benefits and make retirement a little more comfortable.

Mary Beth Franklin is a contributing editor at InvestmentNews.