Millions of Americans count on Social Security to help fund
part of their retirement.
But today, many of those individuals worry about the
long-term viability of the program.
How can we help curb those concerns and keep retirement
savers not only on track but feeling confident about their futures?
Understanding how and why these concerns rattle retirement
savers’ confidence can offer valuable insight for financial professionals.
How Your Clients Really Feel About Social Security
In a recent Principal survey, we took a closer look at
individuals who reported being worried about the long-term availability of
Social Security.
We found that 40% of those concerned are more likely to be
uncomfortable with the retirement planning process.
Among that same group, an overwhelming 80% feel they aren’t
saving enough (or simply don’t know how to save) for retirement.
Beyond savings habits, a lack of confidence in Social
Security causes additional financial worries.
Long-term viability may be compounding concerns people
already have, as evidenced by our recent survey: Three quarters (76.6%) of
employees report experiencing stress with their day-to-day finances.
And 93.6% of employees say they’re stressed about
longer-term financial security.
Knowing what contributes to overarching Social Security
concerns can help you make stronger connections with your clients, provide
unique context and information aligned with their individual finances, and
better guide them through their Social Security and Medicare needs.
How to Make Social Security Work for Your Clients
Of course, this article is educational only; it does not
provide legal, accounting, investment or tax advice.
If you yourself do not have the relevant professional
expertise, you should consult with appropriate counsel, financial
professionals, and other advisors on all matters pertaining to legal, tax,
investment or accounting obligations and requirements.
You should also urge clients to get the professional help
needed to fill in any gaps in the scope of the advice you offer.
But clearly, clients should know that Social Security is one
of the few things that are truly inflation-indexed.
While helping your clients plan for their retirement, be
sure to discuss the following tips for maximizing their Social Security
benefits.
1. Set up a Social Security account log-in.
Do your clients have Social Security accounts set up? If
not, that’s the first place you should start.
Setting up a Social Security log-in now helps individuals
gain access to their statements and see how much they may ultimately receive.
Another benefit: Checking their accounts often leading up to
retirement also lowers the likelihood of identity fraud.
(Setting up an account early helps keep records confidential
and protects your clients’ Social Security numbers.)
2. Resist the urge to withdraw benefits early.
Many people think of Social Security as a system they’ve
paid into and can claim retirement funds from as soon as possible.
That thinking needs to evolve.
Those who claim Social Security early are losing the chance
to grow their retirement income — missing out on a nearly 8% increase on their
retirement income for every year they delay claiming — up to age 70.
Educating clients early on the financial benefits of waiting
can be a key part of building dependable retirement security.
3. Consider a phased retirement.
Talk with clients about opportunities to make the shift to
retirement a gradual one. Opportunities to work part-time, step into roles with
less responsibilities or stress, consulting or mentorship jobs, and more may
all be options that benefit both business owners and their workforces.
For clients who work for others, this opportunity offers a
welcome transition into nonworking years — and a reason to not tap into their
Social Security too early.
For employed clients who are ready to call it a day with
their current employer, encourage them to explore other money-making options
that align with their interests.
A contract or part-time job in a related field (or something
completely new and different) can reduce idle time, build savings and restrict
the impulse to spend too much money.
4. Recognize that family dynamics matter.
It may be beneficial to conduct a couple’s assessment with
your married clients and those in domestic partnerships.
Partners need to carefully consider who should receive
Social Security benefits and when to start.
Additionally, divorcees or widows will have additional
considerations with Social Security, and how it may change family status
(getting married again will impact Social Security benefits, too).
Single individuals who may be considering getting remarried
will need to weigh how their benefits could change, as well.
Be sure to discuss housing and long-term goals. Does staying
in their current home make sense, or would a less expensive home be a better
fit for your clients’ retired lifestyle? No matter where they live, wiping away
as much mortgage debt as possible now can be a big help later.
5. Hold off withdrawals with a bridge strategy.
Push withdrawals until age 70 whenever possible to maximize
Social Security benefits. To do that, you may need to get a little creative.
Consider separating funding into three separate buckets:
Social Security, employer-sponsored plans and personal savings.
Then ask your client to dip into one of the latter two
buckets before relying on Social Security.
For individuals and couples who come up short after doing
the math, you’ll need to talk through other retirement income options.
For instance, an annuity can help bridge the gap and add
some balance to their overall retirement strategy.
This consistent and guaranteed income source might be just
the thing to help clients get over the urge to take Social Security too soon.
A little education and reassurance go a long way.
Nearing retirement comes with a lot of worry about what life
will look like and how to afford it.
Offering some reassurance and education around Social
Security longevity will go a long way in helping your clients alleviate some of
the stress they face today and build confidence in their financial future.
Click here for the
original article.