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It’s never too early to talk with clients about Social Security

June 14, 2023 Jeff Quigley By Jeff Quigley

It’s a financial advisor’s job to raise issues that clients avoid or defer. Some think it’s folly to ask clients in mid-career about their potential Social Security benefits. But let me say, avoiding the conversation may obscure opportunities for both advisors and their clients.

Here’s a case in point: An advisor, we’ll call her Jane, asked her clients, Chris and Amy, “In planning for retirement, have you looked at what you can expect from Social Security?”

Naturally, they hadn’t. They were only 50 years old! But once prompted, they learned how they could optimize Social Security benefits to have more income in their later years. They also discovered, to their surprise, that when one of them died, the survivor’s income would substantially drop.

That led Jane to propose a solution to help them be more confident about retirement at a relatively young age, when they had the time and resources to shore up their plans.

The setup

Chris and Amy thought they might file for Social Security benefits when they turned 66, but they had yet to learn the benefits. Jane used Social Security+ software from LifeYield to deliver a detailed breakdown of benefits available year by year for each of them (see the samples in this case study).

Ultimately, Jane demonstrated that by delaying Social Security filing until age 70, Chris and Amy stood to earn $2,395 more per month and $28,743 more per year. Over their lifetimes, that would add up to more than $250,000 in additional Social Security benefits.

The couple was impressed with Jane’s diligence. Their trust in her advice increased.

What happened next

In modeling Social Security benefits, Jane asked what lifespans to use. They told her to assume Chris survived to age 85 and Amy to 92.

Digging into the reports Jane produced, they got a jolt. By age 84, they would get a total of $127,588 in combined benefits. But Chris passing at 85 would lead to Amy’s Social Security income dropping by about 40% to $77,574.

Like many others, Chris and Amy assumed that survivors continue to receive a spouse’s benefit plus their own. But that’s not the case.

This “aha! moment” opened the door for Jane to have a fuller discussion with the couple about retirement income and legacy planning.

Ensuring the financial security (and well-being) of a surviving spouse

A spouse’s death doesn’t necessarily cut the survivor’s expenses in half. If they shared a home, expenses such as maintenance and repairs, mortgage or rent, and possibly taxes remain. On top of that, an aging survivor may have new costs for health and long-term care. And what if children or grandchildren need financial help

Jane returned to her Social Security software and a second feature called Income Layers. It helped her identify a need for about $330,000 in benefits to replace Chris’s Social Security checks for seven years after his death.

From there, Jane was able to educate the couple about survivorship life insurance and run an illustration based on the income need, a projected asset growth rate, and the premiums needed to support a contract that would fill the gap.

Are you talking about Social Security?

Fifty might seem too young to ask clients about Social Security. But it’s not. At that age, couples like Chris and Amy can still make adjustments, perhaps by:

Everyone is curious about Social Security. They see the deduction for it on every pay stub. It doesn’t hurt to ask your clients if they’d like you to run their numbers. Who knows where the conversation could lead?

Jeff is the Senior Vice President of Enterprise Sales & Relationships at LifeYield. His deep industry experience makes him an important author to watch. He writes about key industry themes, landmark events and game-changing news that's shaping the future of financial advice.