In July 2019, nearly 48 million people claimed Social Security retirement benefits, a number that is expected to grow in the coming years as the population continues to age.
It’s no wonder, then, that financial advisors are increasingly being asked about the program, including when to claim Social Security, how benefits will be taxed, and which sources of income can contribute to a loss of benefits.
Here, you’ll find answers to some of the most commonly asked questions.
According to a recent survey from The American College of Financial Services, financial advisors are less worried about cuts in Social Security benefits for their older clients than they believe their clients are.
The College, which provides educational courses for financial professionals, surveyed 245 advisors with the Retirement Income Certified Professional designation, which it created, and found that 67% of advisors with older clients believed those clients were “moderately worried” about drastic benefit cuts in the Social Security program.
In contrast, only 46% of the advisors surveyed felt the same, leaving more than half (54%) not worried about drastic cuts. If they’re wrong, however, their clients will suffer.
Eighty-four percent of advisors surveyed, however, said a 20% cut in Social Security benefits today would drastically alter their clients’ lifestyles.
The latest annual report of the Social Security Board of Trustees, released in April, estimates that the Social Security Old-Age and Survivors Insurance Trust Fund will be depleted by 2034, which will cut benefits by 23% at that time if nothing is done to shore up the fund.
For additional information on Social Security benefits, see 2019 Social Security & Medicare Facts.
Correction: An earlier version of this article stated that up to half of Social Security benefits are subject to federal taxes. There is an additional tier of taxation based upon a base amount of $44,000 for married taxpayers filing jointly, $34,000 for unmarried taxpayers, and zero for married taxpayers filing separately who did not live apart for the entire taxable year. The maximum percentage of Social Security benefits subject to income tax increases to 85 percent under this second tier of taxation.