Social Security can be a useful tool in making sure you have enough money in retirement. Retirees like knowing the monthly payments will continue for the rest of their lifetime.
But recipients may not necessarily like the program's complexity. That's where advisors can add value.
For people in their early 60s, the timing of when to start taking Social Security requires careful analysis. While many advisors urge clients who can afford it to wait until 70 to enroll — when they'll receive a larger amount — recommendations can vary based on a host of variables.
Many advisors use financial planning software to help crunch the numbers and illustrate different scenarios for clients. As retirees live longer, a big concern is that they don't run out of money. That's why advisors often focus on live-to-100 projections and highlight the advantages of waiting until 70.
"Typically, financial planning software assumes a longer life expectancy and says 'delay until 70' to take Social Security," said John Mason, a certified financial planner who runs Mason & Associates in Newport News, Va. "And we typically default to an average or longer-than-average life expectancy" when helping clients decide when to enroll.
Yet some clients, especially those with a family history of serious health issues, aren't worried about living too long and depleting their funds. Instead, they prefer to collect more money early on when they can still enjoy spending it.
Part of an advisor's job is to simplify financial complexities for clients. When it comes to Social Security, the challenge is streamlining the task of deciding when to sign up.
Engage Clients To Create More Buy-In With Social Security
Involving clients in the process creates more buy-in. Such engagement works better than just advising them on what to do.
Kimberlee Davis, managing director and partner at the Bahnsen Group in Newport Beach, Calif., uses her financial planning software's portal to show clients a list of daily, fixed expenses they might incur, both discretionary and non-discretionary. From there, they review each listed expense and choose which ones are most relevant to them.
"We give them an electronic worksheet to fill out," Davis said. "That helps us get a better sense of the projected costs they might face in retirement."
Similarly, Mason likes to collaborate with clients in figuring the optimal time to start taking Social Security. He knows that many of them want to enroll sooner, not later, and may harbor concerns about waiting until 70.
"Just because we suggest that you delay Social Security doesn't mean you will live on less or have a lower quality of life," he assures them. Then he works with them to identify funds from other sources that they can access in the meantime.
Among the financial planning tools he uses to help clients understand their options is Savvy Social Security Planning by Horsesmouth, a New York City-based firm that provides training and resources to advisors.
"It does a good job of showing the cumulative lifetime benefits of Social Security and compares taking it at different ages," he said.
Appeal To Clients' Preferred Learning Style
Explaining Social Security gets easier if advisors can appeal to clients' preferring learning styles. And the best way to do that is to ask them.
Nick Covyeau, a certified financial planner at Swell Financial in Newport Beach, Calif., often asks clients how they like to digest new information. Some are visual learners. Others want to hear him share stories or talk them through technical subjects. And some like to learn by doing, running different simulations on their own under the advisor's watchful eye.
"I also ask clients for feedback," he said. "If I show them a chart, I might ask, 'What do you think of this?' and "Is this a good chart?'"
When referring to visuals such as charts and graphs, Covyeau likes to pause so that clients can analyze them in silence.
"It's important to ask questions but also pause at points so that they can digest what they're looking at," he said. Talking too much can interfere with their ability to reflect on what they see and draw sound conclusions.
Clients who undergo genetic testing may apply the results to their longevity projections. This in turn can influence their Social Security timing strategy.
"Genetic testing is very specific versus the anecdotal," said Brent Ford, an advisor at Benefit Wealth Partners in Chippewa Falls, Wis. "It can show 'I have a higher risk of cancer' versus 'My mom died of cancer.' I think (genetic testing) is a perfectly practical thing to do" for some individuals eager to project their life span.
