Investment advisers can play a key role in helping clients get the most from their Social Security benefits, a retirement expert told lawmakers.
Most people don't realize that they can significantly boost their retirement income by delaying their Social Security payments for a few years after they hit the initial eligibility age of 62, according to Olivia Mitchell, a professor at the University of Pennsylvania's Wharton School of Business.
If retirees can hold off on claiming Social Security until they're 70, they can increase their monthly payments by 76%.
“It's the best deal going in terms of lifetime protection [and] inflation-index benefits,” Ms. Mitchell said at a hearing of the Senate Aging Committee on Sept. 25. “You can't get it anywhere else.”
The hearing focused on the challenges that baby boomers face as they begin to retire in droves. The current generation of retirees is more likely to carry loans into their post-work lives than previous generations because they have spent more on housing, according to Ms. Mitchell, who also is director of the Pension Research Council.
She suggested that greater access to financial advice would help people nearing retirement lower their debt.
There's a big untapped demand for retirement financial advice, according to Ms. Mitchell, who is also editor of the forthcoming book “The Market for Retirement Financial Advice” (Oxford University Press).
“A lot of baby boomers I talk to know they need help, but they don't know how to find someone that they can trust,” Ms. Mitchell said in an interview after the hearing.
She said advisers' guidance could give them a more prosperous retirement, especially if it focuses in part on when to start drawing Social Security. Too often, advisers overlook this topic.
“They don't think about the claim discussion as part of the financial advice picture because it's not assets under management,” Ms. Mitchell said.
Financial advisers also can help strengthen retirement security by encouraging their small-business-owner clients to adopt employee retirement savings programs, such as 401(k) plans, Paula Calimafde, chairman of the Small Business Council of America, told senators.
She cited statistics showing that employees are 14 times more likely to save through workplace plans than through individual retirement accounts.
“The whole point is getting [employers] into the plan, and advisers are the key,” Ms. Calimafde said.