Marcia Mantell Takes to NPR to Fight Social Security Confusion

What You Need to Know

Record numbers of people are now turning 65 each day.
Even financial advisors struggle to understand all the Social Security claiming rules.
Medicare, and how it interacts with Social Security, is another big source of confusion.

It’s an uncomfortable fact for any financial advisor to admit, but as the author and Social Security expert Marcia Mantell recently told ThinkAdvisor, Social Security’s benefit formula and claiming rules are so complex that essentially nobody has every single rule 100% right in their head.

Indeed, Social Security’s handbook, which is itself billed as an overview of the applicable laws and regulations governing the key federal insurance program, stretches to more than 2,700 detailed entries. There are also occasional changes to the program that can cause significant confusion or disruption, Mantell warned, as was the case about a decade ago with the elimination of the popular file-and-suspend strategy for married couples.

Ultimately, Social Security claiming is both highly important and highly complex for clients and advisors, and there’s “just no silver bullet for simplifying things.”

“Advisors often want to be able to use a rule or a single framework that gives them the one ‘right’ answer,” Mantell said. “Social Security just isn’t like that.”

The ‘Silver Tsunami’

Mantell spoke most recently with ThinkAdvisor a few weeks after she had been invited to appear alongside several other retirement industry luminaries on an episode of the nationally syndicated public radio program 1A, titled “The first waves of the silver tsunami.” Joining Mantell on the panel were Steve Parrish of the American College of Financial Services and Michelle Singletary, a personal finance columnist at The Washington Post.

Mantell said that the invite to speak alongside Parrish and Singletary on a national NPR program represented not just a source of personal satisfaction and accomplishment — it’s also a reflection of two important facts.

First and as noted, Social Security claiming (and retirement planning in general) is a topic where there is a significant lack of knowledge among the public. Second, the U.S. is seeing more people turn 65 and enter retirement on a daily basis than at any point in the nation’s history, thanks to the aging of the baby boomers.

“Put these two things together and the result is that there are just so many people out there who feel like they don’t know what to do,” Mantell said. Or worse, they find themselves relying on shaky advice or just making their decisions blindly — or based on anecdotes from friends or prior generations in their family — and that’s a recipe for suboptimal outcomes.

Some of the areas where Mantell sees the most confusion include the important but overlooked differences between spousal and survivor benefits, and there are a wealth of ways that married couples fail to consider the way one high-earning spouse’s claiming decision could affect the other spouse later in life. In other cases, people have a decent sense of the claiming mechanism, but they let their fears about the program’s financial position dictate their decision and force an early claim for significantly reduced benefits.

A Word on Medicare

According to Mantell, one common area of confusion among clients and advisors is the link between Medicare and Social Security. To be clear, Social Security and Medicare are distinct programs serving older Americans, but they do have an important commonality. That is, the Social Security Administration handles enrollment for Medicare Parts A and B.

Confusion stems from the fact that Social Security’s minimum claiming age is 62, whereas for most people, Medicare eligibility starts at age 65. Under current rules, if a client is receiving Social Security retirement benefits when they turn 65, the SSA will send them a Medicare enrollment package at the start of their initial enrollment period, which actually begins three months before the month they turn 65. If a client has not yet filed for Social Security benefits, however, they will need to apply for Medicare directly on their own, and their advisors should be aware of this requirement.

An Important Consideration for Couples

Broadly speaking, when a person files for their Social Security benefits, their spouse may be eligible for a spousal benefit if that first person was the higher earner. The spousal benefit generally cannot be claimed until the higher-earning spouse files, Mantell emphasized, which they must do before the lower-earning spouse. The maximum spousal benefit is 50% of the higher earner’s benefit and is capped at their full retirement amount.

According to Mantell, if incomes have been mostly similar, or a lower monthly income is manageable during the early retirement period, the lower-earning spouse may want to claim Social Security on their own earnings record first. Then, once the higher-earning spouse files for their benefits (ideally at 70), the lower-earning spouse could then file for spousal benefits based on the larger amount.

This approach may not be quite as attractive as the now defunct file-and-suspend strategy for many married couples, but it’s still an important way to maximize the insurance value of Social Security benefits in the case that the surviving spouse was the lower earner. Something else to add, Mantell said, is that advisors often tend to value keeping as much money in the portfolio as possible, and this may cause them to overlook the longevity risk protections that come from delayed claiming.

A Message for Younger Clients

When it comes to clients who are younger and aren’t yet facing a practical decision about Social Security claiming, Mantell said, there are still some important messages for advisors to get across — starting with the fact that Social Security “isn’t going anywhere.”

“Don’t let your clients just listen to the fearmongering and tell you that they want to get their hands on the money as soon as they are able to,” Mantell said. “I do believe that fear is a source of a lot of errant early claiming decisions.”

Survey reports often find as many as half of millennials and Gen Zers think they’ll get nothing from Social Security, Mantell noted. The fact of the matter is that they are wrong, because even if the trust funds end up going broke as projected, the program would still provide for between 75% and 80% of pledged benefits through roughly the end of the century.

“That’s not a great outcome but it doesn’t mean Social Security will just disappear,” Mantell emphasized. “Even though the inbound dollars will be insufficient to cover all obligations beginning in 2033 or thereabouts, there are many levers that can be moved up or down to limit the damage.”