Our whole industry is doing it wrong. A harsh critique, but spot on when it comes to Social Security planning. Agents and advisors can’t make money from it, according to conventional wisdom, so why waste your time? To ignore it is a major professional fail, for starters, but we’ll come back to that.
Believe it or not, Social Security planning for your clients can (and does) effectively drive production, as well as serve as a bridge to the larger issue of sustainable retirement income.
How is it done?
Currently, there are three areas (or boulders, as I call them) standing in advisors’ way; complexity, coordination and confusion. Roll these boulders aside, so to speak, and the growth potential becomes clear. More importantly, it will engender trust, solidify relationships and potentially lead to increased referrals.
Boulder No. 1: Complexity: The Social Security Administration would have clients believe there are three strategies for claiming benefits; beginning payments as early as age 62, claiming at Full Retirement Age (FRA) or delaying payments until age 70. Even many so-called experts note only six or seven strategies. If only it were so simple. In actuality there are thousands of potential strategies from which individuals and couples can choose. To find success in the space, advisors must commit to attaining a high level of expertise. In addition, it’s extremely unlikely an advisor could remember thousands of possible strategies, at least not without savant-like capabilities. For this reason, employing some sort of modeling software is critically important, and cloud-based and online programs are now available at scalable and affordable price points.
Boulder No. 2: Coordination: The advisor must have a tangible philosophy as to how Social Security will be integrated into the overall retirement income plan. While more Americans are relying on Social Security for a greater portion of their income, the hope is that it is only a part of the overall retirement portfolio. Whether it’s the purchase of an annuity for use in a floor plan, a withdrawal strategy or something completely different, the coordination process and philosophy are key.
Boulder No. 3: Confusion: Confusion surrounding Social Security’s solvency and future viability fuels behavioral biases, such as beginning payments as soon as possible for fear the money will “run out.” It is always best to address points of confusion directly. Breaking down and effectively explaining these biases will reassure clients and engender trust.
All three areas are important, and all three make for great growth and book-building strategies. The primary motivation, however, should be in helping clients. Early in my career, my boss repeatedly told me to put clients first and success will naturally follow. He knew a great deal about both success and helping clients; his name was Charles Schwab.
Mistakes in choosing the optimal claiming strategy cause individuals and couples to forgo tens-of- thousands and sometimes hundreds-of-thousands of dollars, amounts that are otherwise their right to receive. Imagine if you were the one to alert them to this fact.