On Retirement

Most women claim Social Security early

Reduced lifetime income will force many to spend bulk of benefits on health care

Oct 6, 2016 @ 2:15 pm

By Mary Beth Franklin

Women tend to live longer than men, which means they spend more time in retirement and often do so with less savings. As a result, women retirees, on average, could spend 70% of their Social Security benefits on health care costs.

Women count on Social Security to pay for more than half of all their expenses in retirement. But claiming benefits early, which 80% of retired women currently collecting Social Security did, can be a costly mistake that locks in a lifetime of lower income, according to a newly released Harris Poll. The online survey included 465 women over age 50 who are retired or who plan to retire in the next 10 years. Only 5% of those currently collecting Social Security waited until age 70 to claim the maximum benefit.

“Too many women retirees have no retirement income outside of Social Security,” said Roberta Eckert, vice president of the Nationwide Retirement Institute, which commissioned the survey. “And even for women that do, the fact that they live longer makes maximizing Social Security benefits extremely important.”

About 30% of the women surveyed said their Social Security benefit is less than they had expected. But 86% of those who worked with a financial adviser said their Social Security benefit was as expected or more than they expected.

(More: Small Social Security cost-of-living adjustment likely for 2017)

“There are a variety of efficient filing strategies open to women, but too few seek professional advice from a financial adviser to take advantage of them,” said Kevin McGarry, director of the Nationwide Retirement Institute.

Only 13% of the women in the survey said they received advice on Social Security from a financial adviser. But it's not because they don't want advice. More than 60% of the women surveyed said that if their financial adviser could not show them how to maximize their benefits, they would switch to an adviser who could.

Nationwide projected that an average female retiree who claimed benefits early could spend 70% of her Social Security benefits on health care costs in retirement.


Separately, a new report released Tuesday shows there is still little conformity or consistency in how advisers work with retirement-income clients. There is no consensus on key elements of support, such as the approaches used to meet investor income needs, the use of products specifically designed for income such as annuities, the targeted withdrawal rate, the desired income-replacement rate or the sources they turn to for assistance, according to a research report released by GDC Research and Practical Perspectives, two independent consulting and research firms that work with wealth management providers and distributors.

“Advisors and Retirement Income Support — 2016” builds on prior research dating back to 2008 and examines trends in how advisers work directly with individual retirement-income clients. The analysis reviews the key challenges advisers experience when working with retirement-income clients from a portfolio management, practice development and client relationship perspective.

“Retirement-income investors comprise the core target audience for many advisers yet there remains great diversity in how advisers work with these clients and little consensus on how to deliver income,” said Howard Schneider, president of Practical Perspectives and author of the report. “Market volatility and low interest rates have created continued challenges for advisers in responding to the fears and anxieties of retirement-income investors, especially the newly emerging baby boomers.”

The report is based on input from more than 600 financial advisers who participated in an online survey last summer. They include full-service brokers, independent brokers, financial planners and registered investment advisers.

For nearly 60% of the participants, retirement-income relationships represent more than half of all assets managed. More than half of the advisers surveyed said retirement-income investors comprise more than half of all the clients they currently support. Most advisers said they do not expect to make significant changes in how they support retirement-income clients in response to the Department of Labor ruling on retirement advice, although many expect to increase their use of fee-based services and to seek more low-cost options.

(More: Social Security timing can affect Medicare premiums)

“While support for retirement-income clients is a core activity of virtually all advisers, few specialize exclusively on the topic and many still do not have a significant focus on offering help with less traditional subjects such as Social Security, health care or cognitive aging,” said Dennis Gallant, co-author of the research report. “Opportunities still remain for product providers, distributors and other information or technology sources to help create and enhance the products, solutions and services that advisers can use with retirement-income investors.”

(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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