Factoring Social Security Into Your Client’s Retirement Strategy
March 28, 2014 by Deb Repya
Social Security is a key source of retirement income. Almost 58 million Americans received benefits from Social Security in 2013 with 70 percent of those benefits going to retired workers and their dependents. Eighty-six percent of seniors (age 65 and older) depend on Social Security as one of their most important retirement income sources. Considering the prominent role that Social Security benefits currently play, these benefits can be a key part of most retirement planning conversations.
When creating a retirement income strategy, your clients should consider major factors that influence Social Security benefits. The factors to consider include when Social Security benefits should start, if a spousal strategy is needed for married couples and how clients can supplement their Social Security income if needed. There are a number of resources available to help you educate your clients on their retirement strategy options and effectively estimate their Social Security benefits
Timing is everything. The amount of a client’s Social Security benefit depends upon when they elect to start it. Retiring early is common. An Insured Retirement Institute (IRI) 2012 study showed that almost half (48.7 percent) of baby boomers expected to retire at age 65 or older. The reality is, however, that the actual average retirement age is 60, according to the 2012 Gallup Annual Economy and Personal Finance Survey. Deciding whether early retirement is feasible can be a stumbling block for many clients because the earliest age one may receive Social Security retirement benefits is age 62.
If a client takes their Social Security benefits prior to their Full Retirement Age (FRA), the benefit will be reduced – as shown in the chart below. Someone who retires at age 62 for example, will have drastically reduced Social Security benefits (up to 30 percent) if they have an FRA of age 67. Without the proper planning, a benefit reduction may have a drastic effect on their retirement income.
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