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5 Ways to Use Social Security’s New Statements to Help Your Clients

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What You Need to Know

  • The redesigned statement shows the effects of starting benefits each year between age 62 and 70.
  • Advisors should also discuss whether the payments clients will receive each month in retirement will be enough for them to live on.
  • Clients may be surprised to learn that Medicare premiums are paid out of their Social Security benefits.

Social Security statements already served as handy tools. But the changes that the Social Security Administration is rolling out will help advisors and clients even more.

Advisors who have never used their clients’ Social Security statements to provide a clearer picture of how much they will get when they retire have been missing an opportunity, according to advisors and financial planners interviewed by ThinkAdvisor.

That opportunity has grown even larger with the enhanced statement, which shows the effects of starting benefits each year between age 62 and 70. The SSA recently rolled out the new, shorter statements to a limited number of Americans.

Research has shown that people who see their statements tend to make better retirement choices, according to Jeffrey Levine, chief planning officer at Buckingham Wealth Partners.

He and the others we interviewed pointed to five key things advisors can do now with Social Security statements to help clients.

1. Take advantage of the enhanced statement’s standout feature.

The new version of the statement provides a “really easy graphical way of showing people, right on that first page, what their benefit will be by delaying” their retirement,” said Levine.

After all, rather than just ages 62, 67 and 70, the redesigned statement shows what the estimated monthly benefits would be for each of nine years if you start receiving benefits from ages 62-70 — in a personalized graphic with a series of horizontal bars.

At 62, it is tempting to say “70 is so far away,” he said. But when you’re talking about 63, the client might say, “63’s not so bad and look, next year I get more if I wait,” he noted.

“That is the biggest change on the form and that’s what probably” will drive the most advisor conversations with clients once the enhanced version is made available to more Americans, he added.

Advisors can already illustrate this through software. But the new statement offers a “very quick and dirty way of going about this,” Levine told ThinkAdvisor.

Jody King, vice president and director of wealth planning at private wealth management firm Fiduciary Trust in Boston, said she had yet to see an enhanced statement. But, based on what she saw and heard about the redesigned statement, she too gave a thumbs-up to the expanded number of retirement ages included in it.

Robert Conzo, CEO, managing director and co-founder (with Eric Diton) of The Wealth Alliance, an RIA based in Melville, New York, agreed also.

“That one change, from a financial planning perspective, really makes” the client’s cash flow and “retirement picture going forward much, much more accurate,” Conzo said.

2. Discuss if the amount clients will receive when they retire will be enough to live on.

Even before the enhanced statement, “there’s plenty that advisors should be doing with respect to Social Security statements,” according to Levine.

The statement could already be used by advisors to help clients in “understanding the various benefits to which [they] may be entitled,” he said.

For example, he said, an advisor can ask a client: If he or she were to become disabled, would the amount that person stands to receive each month be enough for them to get by on, based on what the statement shows for specific retirement ages?

“The answer in most cases for advisors’ clients is going to be no,” he said, and “that leads to other discussions, such as: Do we need to look for disability coverage? How would we reduce your expenses if these things happen?”

3. Make sure clients are reviewing their statements for errors.

Going through the statement and looking at the earnings history for each client is something that advisors should be doing regularly, according to Levine. For clients who are still working, they should be checking to make sure that earnings are reported properly each year and, if not, helping the clients contact the SSA to rectify that, he said.

4. Check that clients have created online SSA accounts.

In addition to making sure that clients are seeing their statements, it is crucial for advisors to make sure clients have created an online account at the SSA’s website so they can access the statements digitally, Levine said.

Agreeing, King said, “it’s so important for so many reasons and people don’t do it.” Unfortunately, the “vast majority” of her clients do not set up online SSA accounts until her firm encourages them to do so, she said.

Also, because of all the data breaches in recent years, “probably most of our Social Security numbers are out there,” she said. Therefore, she explained: “It’s better to be proactive. Set up your account so somebody else can’t.”

5. Be sure clients understand that Medicare costs come out of their monthly Social Security payments.

“The most misunderstood aspect of Social Security is how Medicare is paid” among Conzo’s clients, he said. “Most people don’t realize that Medicare … gets paid out of your Social Security benefit,” he said.

One way to further enhance the statement, therefore, would be if it includes a noticeable, “very short blurb” explaining this, he said. “Even sophisticated people that are smart” still don’t understand this, he added.