Would you let a person teeter on the edge of a cliff without pulling him back to safety? Or what about letting a child walk on a lake’s thin ice without shouting a warning and going to her rescue. In both cases, I’m sure you’d get involved because it’s the right thing — the ethical thing — to do.

So why are so few financial advisors doing hands-on Social Security planning? Surely they realize, as we discussed last month, America’s pre-retirees desperately need and want advice in this crucial area. And they need it because:

  • Social Security is so complex, the average person is clueless about the optimal time to file for benefits.
  • When clients plan themselves, their cognitive biases often lead them to make costly mistakes (e.g. filing too early) 
  • Failure to consider each spouse’s benefit is a huge problem, due to people not knowing how spousal benefits, worker benefits and survivor benefits interact.
  • Too many clients get blindsided by what a Prudential Financial white paper calls the “tax torpedo” (i.e., paying a higher tax rate on their Social Security benefits because IRA rollovers increase their income and marginal tax rate).

Still, despite these issues, only one out of four financial advisors does robust Social Security planning. According to research conducted last year by Practical Perspectives and GDC Research, 26 percent of advisors provided basic Social Security information and 30 percent presented various scenarios. But only 26 percent recommended a specific claiming approach, the strategy most likely to produce an optimal payout.

Why so reticent? According to Howard Schneider, president of Practical Perspective, one reason is advisors don’t want to pay for expensive planning tools. They prefer to use the Social Security Administration’s free calculator or license a low-cost one themselves. Another is they’re uncomfortable presenting the optimal claiming strategy and integrating it into the overall retirement plan due to lack of training. Finally, they’re not convinced the current planning tools are easy enough to use.

I’ll add two other issues. They may not see Social Security planning as a way to attract new clients, reserving it for their existing customers, often a lower priority. And they worry about the opportunity cost of learning a complicated new service when they’re already busy enough.

These are valid concerns. But should they stand in the way of doing the right thing for America’s pre-retirees? In my view, they shouldn’t, and here’s why:

  • Large numbers of people will suffer financially if they make the wrong Social Security call. 
  • A cottage industry of trainers and software developers has sprung up to provide solutions and support.
  • Failure to step up means more people will run out of money and need public assistance during retirement, which isn’t good public policy.
  • Doing the right thing is intrinsically rewarding for advisors with integrity.

Consequently, here’s my best advice:

1. Get off the sidelines; commit to getting hands-on with Social Security planning as soon as possible.

2. Ask your clients what specific help they need, and either develop the expertise and/or license it.

3. Tap FMO and insurance company resources whenever possible to augment your planning toolkit.

4. Finally, integrate your recommended Social Security planning strategy into your clients’ retirement plans so they know exactly how this crucial decision will affect their future income streams and tax obligations. 

Because, at the end of the day, too many Americans are treading the cliff’s edge with their retirement savings. Shouldn’t you rescue them now while you have the opportunity?