On Retirement

Demand for Social Security advice growing

Majority of future retirees threaten to switch from advisers who don't offer guidance

Sep 21, 2017 @ 11:31 am

By Mary Beth Franklin

Less than 20% of older Americans work with a financial adviser who provides guidance on when to claim Social Security benefits. Despite the low incidence of this type of holistic financial advice, it marks an improvement from recent years, according to a new survey of Americans age 50 or older by the Nationwide Retirement Institute.

Among future retirees who are currently working with an adviser, 58% said their adviser provided guidance on Social Security benefits compared to 38% of recent retirees and about a third of clients who had been retired 10 years or more. But in about half of the cases, it was the client—not the adviser—who initiated the discussion about how and when to claim Social Security benefits.

Despite the apparent reluctance among some financial advisers to offer Social Security guidance, it seems to be an increasing priority for clients.

Nearly 80% of future retirees who work with a financial adviser said they would switch advisers to maximize their Social Security benefits compared to about half of current retirees, according to the fourth annual Nationwide study on consumer Social Security preferences. The first three studies showed a similar high incidence of clients willing to switch advisers if they did not get the information they were seeking on how to maximize benefits.

"This is a call to action for financial advisers to make sure they are having these important conversations with clients about Social Security," said Tina Ambrozy, president of financial distribution at Nationwide.

Many financial advisers shy away from Social Security conversations because they feel they don't know enough about the complex topic, she said. But that's no excuse. Instead, Ms. Ambrozy suggested that advisers take advantage of Nationwide's free Social Security 360 Analyzer tool to help start conversations with clients about important claiming decisions.

Future retirees appear more willing to wait to claim larger benefits than previous waves of retirees, according to the study. About half of future retirees say they plan to wait until their full retirement age or later to claim Social Security benefits compared to an average age of 62 for current retirees. More than 80% of future retirees who plan to delay claiming benefits cited larger benefits as the main reason and 19% said they didn't need the money now.

Of the 29% of future retirees who said they plan to claim Social Security benefits early, nearly half said it was because they expect to retire before full retirement age. Another 19% said they were unsure when they would claim benefits.

Many who plan to claim Social Security early cited concerns that benefits might be reduced due to long-term funding problems or Social Security reforms and about a quarter said they fear they would not live long enough to justify the delay.

In fact, 78% of future retirees said they are worried about Social Security running out of money during their lifetime. "That's the highest percentage we have seen since we started this survey," Ms. Ambrozy said. In addition, about half of current and future retirees believe the current Trump administration will cut Social Security benefits.

Most current retirees have no regrets about claiming their benefits early. Of the three-quarters of current retirees who said they would not change their claiming age, many cited the fact that they needed the money, retired earlier than planned or had health problems.

Health issues played a major role in this year's study. A third of current retirees said their health problems are interfering with their retirement and the majority of them said they experienced health problems sooner than they had expected. Still, about three-quarters of current retirees said they were able to do most of the things they wanted in retirement.

Ms. Ambrozy noted that Nationwide also offers a free retiree Health Care Cost Assessment tool for advisers to help estimate their clients' future medical expenses.

There is one thing that both recent retirees and those who have been retired more than 10 years agree on: No longer working is the top reason they say life is better in retirement. That should ease the fears of many future retirees among whom only 26% expect life to be better in retirement.

(Questions about new Social Security rules? Find the answers in my new ebook.)

Mary Beth Franklin is a contributing editor to InvestmentNews and a certified financial planner.

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