How much do you know about Social Security? Not just the basics, but how much do you really know? Enough to sit down with each of your clients right now and confidently outline all of their claiming options, including a recommended course of action that will help them reach their retirement goals?
If you are honest and acknowledge that you don't know as much as you think, you are probably not alone. Many advisers underestimate the importance of having deep knowledge of this important cornerstone of retirement income.
And yet there are many reasons why financial advisers should be nothing less than Social Security experts.
First, as private pensions disappear and interest rates remain depressed, retirees are increasingly dependent on Social Security to fulfill a greater part of their income needs. That means it will be more important than ever that clients maximize their benefits.
Second, there is a lot at stake. The difference between claiming benefits at the right time or the wrong time could mean thousands of extra dollars a year and tens of thousands of dollars over a lifetime. A mistake could be disastrous for some retirees.
Third, consumers expect their advisers to be experts in Social Security and help them make the important decisions about when and how to claim benefits. In a recent online survey of 500 married couples by Social Security Timing, a software company, 46% said they would want their adviser to calculate their Social Security-timing options, up from 40% two years earlier. Even more important, 54% said they would look for another planner if their adviser could not — or would not — analyze their best claiming option, up from 44% in 2011.
Advisers who are reasonably well-versed in Social Security recognize that each retiree and each couple they counsel has a different set of circumstances that will affect when they should start collecting benefits. While the rule of thumb seems to be to put off collecting until at least 66 — and possibly until 70 to maximize benefits, as long as you don't need the income — there are other factors to consider. Good advice for someone in reasonable health and a history of longevity in their family may not work for someone in ill health whose parents both died young.
Advisers looking to learn more about Social Security can turn to organizations such as The American College of Financial Services and the Retirement Income Industry Association for help. Both have courses that apply to credentials in retirement planning that cover Social Security-claiming strategies.
Learning more about Social Security will add more value to an adviser's skill set, helping existing clients and bringing in new ones.