Will My Social Security Be Enough? How Financial Advisors Can Prepare Clients for What’s Coming in Retirement



  • Current headlines about Social Security might stir worries that the monthly checks it offers will not be adequate earnings in retirement.
  • New propositions intend to fortify Social Security’s yearly cost-of-living modification for 2021 and fix its trust funds.
  • But even as the fate of those potential changes remains unsure, consultants can calm customers’ worries and help them build a solid retirement income strategy.

It’s no secret that lots of people worry about whether Social Security will be there for them when they retire.

And current headlines might be stirring those worries.

Last week, the Social Security Administration revealed the yearly cost-of-living adjustment will be 1.3% in 2021.

The change will amount to simply $20 more per month for a retiree who now gets $1,523 monthly.

Meanwhile, the Covid-19 pandemic is expected to even more decrease the trust funds which supports those advantage payments.

The Social Security Administration’s most recent price quotes suggest those funds will be depleted in 2035, at which point just 79% of guaranteed benefits will be payable. That timeline might be sped up now that millions are jobless and no longer paying Social Security payroll taxes.

For monetary consultants, now is the time to inform clients about what those headlines truly imply and help them safeguard their retirement plans.

It still pays to wait

Individuals’ concerns about the program’s future, or perhaps their own work prospects, could lure them to take their retirement benefits as early as possible at age 62.

However, by taking benefits early, they register for a lifetime of lower month-to-month payments.

It pays to wait. Those who postpone up until their full retirement age– 66 or 67, depending on the year in which they were born– will get 100% of the advantages they earned. For each year they wait after that, as much as age 70, they stand to get 8% more.

“In this zero interest rate environment that we’re living in right now, the value of delaying advantages and getting 8% each year for every year you delay your benefits between your full retirement age and 70 is huge,” Mary Beth Franklin, a Social Security advantages professional stated Tuesday at CNBC’s Financial Consultant Top.

The one caution: You need to be healthy enough and wealthy enough to delay, Franklin stated.

Congress could step in

Last week, 2 Democratic congressman –– Reps. Peter DeFazio, D-Ore., and John Larson, D-Conn. –– created an expense to change next year’s 1.3% boost with an emergency situation 3% SODA.

The lawmakers are wanting to have the proposition included in present stimulus talks.

“We hope that it will end up being part of the settlements that are continuous,” DeFazio told CNBC recently.

If that modification is not possible now, it could be reviewed in January with a brand-new Congress, Franklin said.

“Depending on who controls the Senate and who controls the White Home, you may see this reintroduced in January,” Franklin stated. “Depending on where the politics lie, it may have a chance.”

Propositions are likewise on the table to bring back the program’s solvency. Democrats in Congress have advanced prepares intended at getting the program back on track. Democratic governmental candidate Joe Biden also has a proposal to fortify the system.

It’s likely Congress will make fixes prior to any significant benefit reductions start, Franklin said.

Planning considerations kate_sept2004

When taking a seat with clients, consultants can start by reassuring them their Social Security benefits aren’t going to disappear.

Younger people, nevertheless, may see modifications from the amount on their existing approximated benefits statements, Franklin said. For older customers, advantages will likely remain the very same.

Significantly, Social Security approximates do not include cost-of-living modifications.

Financial consultants might desire to do the exact same when factoring those month-to-month look into a general retirement earnings strategy.

“A lot of individuals choose to utilize absolutely no,” stated Steve Zuschin, executive vice president at LifeYield, a service provider of retirement income software. “They say, Hey, we’re just going to bring it back to present dollars.

We do not know the modification is going to be.'” SEE NOW

Nevertheless, it’s also a reminder of the power of delaying benefits, said Joe Elsasser, creator and president of Covisum, Social Security claiming software application company.

Take a high wage earner who would get $2,600 each month if they declared at full retirement age. If they rather declare early at 62, a 1.3% COLA on their $1,950 benefit would be $25.

On the other hand, if they waited to claim up until 70, their $3,300 month-to-month check would see a $43 per month raise.

“SODA when it’s applied to a larger advantage is a bigger boost,” Elsasser stated.

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