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October 06, 2013 at 04:52 PM
“I honestly give my clients the number to the local Social Security office if they have questions,” an advisor recently said. “It just gets too complicated and there are too many changing variables.”
It’s safe to say Bob Seawright does not agree with that advisor, although he’s not surprised by the attitude.
“I start with the general assumption that advisors too often ignore Social Security,” the chief investment and information officer for Madison Avenue Securities concedes. “There is not a lot of “there” there. They simply don’t make money at it.”
But with the increasing intensity of the fiduciary debate, it’s hard to see how such an attitude will last much longer.
“Studies confirm when retirement works, people are happy, strong, healthy and even more romantic,” Seawright notes. “When it doesn’t, those same studies find people go through hell.”
For this reason Social Security is “enormously popular and enormously important.”
He cites statistics from the Employee Benefits Research Institute that find it accounts for more than 36% of income for all retired people. But that number is skewed by the super wealthy; remove that outlier, Seawright says, and the percentage rises to almost 45%.
“As advisors, we have to therefore at least look at it. Only 2% of the population has saved more than $250,000. With inflation, that will soon get you a cup of coffee at Starbucks once a week. Yet a couple that is entitled to $2,000 a month in Social Security comes out to an asset worth about $850,000.”
