The Wealthy Need Social Security Advice, Too

The industry should be ashamed.

There, I said it. As I’ve noted time and again, advisors largely avoid Social Security planning with their clients because they think they either can’t make money from it or they believe their higher-net-worth clients don’t care. Wrong on both counts.

If you eschew Social Security planning because you can’t make a few extra basis points, you fail to see the bigger picture and I fear for your clients. As for the latter, a less-than-optimal claiming strategy can result in hundreds of thousands of dollars less for your high-net-worth clients. Last time I checked, such a sum still constituted a lot of money; I don’t care who you are, you’d be pretty upset with the person who lost it for you.

Regardless of the income level, the need for quality Social Security advice is there. A higher percentage of the population is retiring than ever before, more of those retirees are relying on Social Security for a greater portion of their retirement portfolio and the Social Security Administration chooses now—of all times—to begin closing offices and cutting hours of service.

How does the advisor industry respond? With canned strategies and crappy advice. Consider: 

  1. The best trade publications rarely touch Social Security. When they do it’s often misleading and fails to coordinate the program with the rest of the retirement portfolio. Coordination of benefits with other retirement assets materially affects the quality of the forecast and how the assets are drawn upon; for example, conventional Roth rules are thrown out the window once Social Security benefits are introduced.

  2. Software programs are now available to assist in identifying the optimal Social Security claiming strategy, with one offering six strategies from which clients can choose. We’ve identified hundreds of thousands of potential strategies depending on a multitude of factors—need I say more?

  3. Which brings me to free calculators currently offered on the Internet, some by large fund companies and financial services organizations. Remember, you get what you pay for. One well-known national brand has a tool that defaults to either age 85 or age 95. That’s it; it can’t be changed. If you die at age 70 or live to 100, the estimate the tool spits out it flat-out wrong.

Correctly claiming Social Security can result in anywhere from two to 10 years of additional benefits. It has a material impact to your clients’ projections and withdrawal strategies. If you in any way consider yourself a retirement planner (advisor, strategist, whatever) you have to include comprehensive and coordinated Social Security planning—period.  

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