The typical American views Social Security as an entitlement – there for the taking at the first opportunity. But retirement planners know that isn’t often the best move. Financial advisor Karla McAvoy, of HC Financial Advisors, discusses the best ways to educate a client on when the time is right for Social Security, no matter what their circumstances.

Q. Please tell us a little about your firm, the clients that you represent and what you specialize in with regard to retirement planning.

Karla McAvoy: Our firm is 30 years old now. We’re a fee-only financial planning firm, covering both financial planning and asset management. We have eight people in the firm right now; about 210 clients; and about $260 million under management. The majority of our clients come to us a little bit before retirement or right into retirement. This change in how they are going to receive income is often a trigger for them to seek out financial advice. We do tend to get people in that 50-65 range, but really our clients run anywhere from a few in their 30s to a couple over 100 right now.

Q. Over 100?

Karla McAvoy: Yes, we have two clients that are over 100-years-old.

Q. And they’re still doing retirement planning?

Karla McAvoy: Well, they don’t do much financial planning, but they still need asset management.

Q. The unfortunate part of what I hear in your response is that most of your clients wait until they are nearly at retirement age before they come seek you out.

Karla McAvoy: I would say that is mostly true. Certainly we get clients at all times. It might be somebody that is going through a job change. It tends to be a major life event that triggers somebody. For example, there are a lot of widows that we work with, divorcees … Anytime that they are suddenly finding themselves in a different economic situation it can lead them to come to us. The other big one is an inheritance of some sort.

Q. Are there any trends or events in 2014 that will have an impact on how retirement planners should advise clients on Social Security?

Karla McAvoy: I don’t know that there is anything specific in 2014 that could cause me to change my advice to planners. I think that my advice tends to be fairly consistent, which is that people are living so much longer … and we just talked about the fact that we have a couple of clients that are over 100 years old … and they tend to be very healthy into their 70s and 80s. One of the strongest pieces of advice that a retirement planner can give to somebody that is near retirement is to work a little bit longer if they like their job and they can continue to do it. Because by working they can increase the amount of Social Security benefits that they get. They’ll get a larger benefit than they would normally be entitled to if they can wait all the way until age 72.

Q. When a typical client or would-be client comes to see a retirement planner, when do they usually intend to file for Social Security and what should a planner advise them based on what you just said?

Karla McAvoy: At first blush, I think that many people want to take Social Security the minute that they’ll eligible for it, which is usually at 62. Even if they’re still working — especially if they’re still working — I encourage planners to tell their client to wait. I sense that many people worry about the government; the funding; is Social Security going to be there. Many clients come in thinking, ‘oh, I should take it right away to make sure I get some.’ But planners should tell their clients — especially from the Baby Boomer generation – that it is not going to be fundamentally different than it is right now.  There is basically just a math problem going on – we’ve got more people collecting, and collecting more than is going into the system. There are small changes that we can make in the way that Social Security is collected that can make it viable. Hopefully after a retirement planner educates them on the benefits of waiting, almost all of them are going to do that.

Q. How about younger clients, the clients that are in their 30s. Do they assume that Social Security will be there for them as well?

Karla McAvoy: No, I would say that they’re definitely more cynical about whether Social Security will be there, at least the ones that we’ve worked with. We have a fairly high minimum [in personal assets], which is $1 million. So these tend to be pretty well established professionals, or younger couples that have received money, perhaps from an inheritance. But they tend to feel they may not have Social Security available. So they have a much stronger desire to save what they need for retirement. I can’t say that’s true across the entire generation, but I definitely see that among our clients.

Q. Obviously not everyone in their 30s thinks, ‘oh no, there’s not going to be anything left for me.’ And there are certainly people in their 40s and 50s who may have a very cynical attitude about how much they’re going to be able to collect. How should a planner’s advice differ for somebody who doesn’t expect that they’re going to be able to tap into Social Security?

Karla McAvoy: Typically, we do comprehensive financial planning, and we’ll run models and we’ll show — based on this rate of savings and expenses and so on — this is how we would expect your retirement to go. For those younger people especially who ask us to eliminate the Social Security benefit, we can do that and just show them that if you had a Social Security benefit this is what your retirement could look like. And if you do not, this is what it could look like. I would say most of them are pretty strongly in favor of saving anyway, so it just gives them a level of comfort that if can see if Social Security were there it would just give them a little boost in income in retirement.

Q. What is your advice to another retirement planner who is perhaps new in the game — they haven’t been doing this long, and they haven’t seen Social Security from a historical perspective to know how to best ease the concerns and fears of a consumer who is worried about it?

Karla McAvoy: From a planner’s perspective I think it is very important to stay educated on what’s going on with legislation. There is plenty that you can read about the various reforms that are being proposed that could make Social Security viable for quite a long time. There is a web site called www.acquariary.org that has a fair amount of information about the various reforms that could be enacted that would continue to make Social Security viable. Education for us is probably one of the most important parts of our profession, so I think just going out and looking at some of these Congressional reforms that are out there.

Q. Is that how you keep yourself informed and up to speed on what is going on, or what other resources do you tap into?

Karla McAvoy: I’m a big reader. I read the Journal of Financial Planning. I have been very involved with numerous conferences for the profession. At almost every conference you will find information or sessions on Social Security. I may not attend one at every conference but certainly once a year or so I just go and catch up on it. I also subscribe to a web site called www.savvysocialsecurity.com. It is put out by a group called Horse’s Mouth. We rely on information there quite extensively. There are a whole variety of tools that you can use to model a particular client’s Social Security: what it would look like as a couple; what it would look like if one person dies quite early; what would happen if you wait and receive your Social Security at age 70. We use those models quite a bit to help clients as well.

Q. Getting back to the 100-year-olds, do you use them as examples when you talk to clients about their experiences in saving for retirement, and what their experiences were going through the various years in retirement? Do you point to them in any way as examples and if so, what do you have to say about them?

Karla McAvoy: We do all the time. One of the arguments that people always come in with on why they want to get Social Security at one of the earlier ages is, ‘I don’t think I’m going to live another 10 years,’ or some other argument like that. But the reality is that if you look at longevity statistics, if somebody has made it to 65 they’ve very likely to make it another 15 or 20 years. So I use the statistics. I also will be more than happy to say, ‘and you know what, we have clients that are over 100-years-old.’

Q. Are many clients surprised at the advice that they receive when they come in for a consultation versus what they would have anticipated?

Karla McAvoy: Some yes and some I think — especially if we’ve been working with them for a while — they kind of know where we’re headed with this. A lot of people will come in and have had that conversation with a friend or over a golf match or ‘so-and-so said I ought to be taking it right away, and you’re saying I shouldn’t,’ that’s where I start to lean on the numbers.

Q. What is your best advice for a retirement planner working with a married couple when it comes to Social Security? What should the strategy be?

Karla McAvoy: There are so many interesting strategies that you can employ for a couple. This is definitely a case where I would want to model various scenarios. There’s the strategy of each of them waiting [to collect0. If both of them have worked, especially if they have quite a large difference in their salaries, does it make sense for the one who’s making less to claim on their own benefit, or to claim the spousal benefit. There are various – they’re not really tricks but there are things out there that would allow the higher earner to “file and suspend” – so they could essentially say, I’d like to file for Social Security but I’m not going to collect on it. That allows their spouse to collect on it. This one I find much more difficult. I don’t think there is one simple answer. It is very personal, based on the couple, what they’re earning, if there is an age difference, if there are any health problems. I will find myself often running quite a number of scenarios to try to figure out what the best one is for them.

Q. What should planners recommend as the best alternatives to collecting Social Security at an early retirement age – that is, other assets or benefits that someone can tap into so that they don’t have to start collecting Social Security right away?

Karla McAvoy: The best asset that somebody can have is there job. So I think if you’re still working that allows you to push off collecting Social Security. In the absence of that – and this is becoming less likely — if somebody can draw on a pension that can be helpful. In our client base, most have some other invested assets that they can begin to draw on to delay their Social Security for a few years.

Q. What is the advice that you think planners most want their clients to follow with regard to Social Security benefits?

Karla McAvoy: Don’t retire too early. This is advice that someone has to consider given their health, their energy, their interest in their job. But if all of those things are OK, it really helps to continue working. I think some people want to retire at 55 and 60 – and that may force them into a situation where they have to take Social Security earlier than would be advisable. Once somebody truly is retires and needs to draw income from somewhere I would say work with somebody or run the numbers yourself and see what a remarkable difference it makes to just push off collecting Social Security for even a few years. It continues to accumulate throughout your lifetime, and you probably are going to live longer than you think you are. Being able to collect that larger benefit can really help you.

Q. Finally, what would your parting advice be to retirement planners on how to best advise their clients?

Karla McAvoy:  For retirement planners, keeping up on the legislation on what’s going on with Social Security so you can have answers to client concerns. And then, secondarily, becoming really familiar with the different strategies that are available with Social Security, especially in the way that couple can claim their benefits and even switch their benefits throughout the years to maximize the amount they receive.