In his role as a managing director of applied insights at Hartford Funds, Mike Lynch spends a lot of time interfacing with members of the public about important retirement income planning topics — especially Social Security.
While he is sometimes pleasantly surprised by the level of knowledge near-retirees bring to the table, more often than not, Lynch finds himself teaching people the basics: How their benefit is calculated, what options they have in terms of timing their benefit claims, how the vital retirement income insurance program is funded, etc.
In some cases, Lynch recently told ThinkAdvisor, people voice embarrassment about their lack of know-how and some of the decisions they’ve made as a result.
“I had a person come up to me during a recent seminar that I gave, and they told me that hadn’t realized that they could file at any age over 62 and before 70,” Lynch recalled. “They had believed that you could only claim at 62, 67 or 70, and they had made a suboptimal early claiming choice as a result. In reality, as we know, you can claim at 63, 64, or any other age once you’ve passed the minimum.”
Other frequent topics of inquiry include how spousal benefits work, and whether a person may be entitled to a benefit from a prior marriage that ended a long time ago. Likewise, people broadly seem to misunderstand how work income early in retirement interacts with their benefits.
But what’s even more striking for Lynch than the questions themselves is that many people seem to think they have nowhere to go for individualized help, whether on Social Security claiming in particular or with building a financial plan in general.
“That’s where I tell them about the important role that financial advisors play, especially trusted advisors who are based in the local community and who get to know their clients really closely,” Lynch said.
Lynch frequently explains to people that they can work with a planning professional to navigate the claiming process and make better overall decisions about their retirement — and that fiduciary advisors today don’t just work on the investment portfolio.
A Word of Reassurance
Beyond encouraging people to seek out professional help when needed, Lynch also frequently finds himself offering words of reassurance about the future of Social Security.
While he is certainly concerned about the program’s shaky financial outlook, he’s also firmly in the camp of experts who expect that Congress will shore up Social Security before benefit cuts become necessary in the early to mid-2030s.
“People come up to me all the time and say they understand that delayed claiming will give them a bigger benefit, but they chose to claim early because they wanted to get their hands on some of their benefit ‘before it’s gone,’” Lynch recounted. “I can tell you that folks are pretty terrified about the program going away, so it’s important that we educate them about the likely path forward.”
In Lynch’s view, a package of interrelated reforms is the most probable outcome, with Congress following the blueprint from reforms in the 1980s and doing what it can to shield current retirees and older workers from significant alterations to their benefits. Also likely, he believes, is that Congress will wait a good while longer before getting truly serious about negotiating a solution.
While it can be hard to convince the most skeptical people about the durability of Social Security, Lynch said, advisors should still make the effort to inform and reassure their clients that their hard-earned benefit isn’t going to just disappear.
Celebrating Social Security
Lynch said he recently attended an event that took an interesting and effective approach to doing just that, in the form of a 90th birthday party for Social Security.
“It was a really clever idea to get people thinking about how the program has endured for a long time in the past and that it’s going to endure for a long time to come,” Lynch observed. “They really set the scene by playing music from the 1930s when the program was first created, and they had posters that spoke about how much things like eggs or a new car had cost way back in the 30s.”
From what Lynch could tell, learning about the program’s extensive history and the fact that the program has navigated significant moments of hardship in the past had a real impact on people.
“You could see their eyes light up, and they realized that they maybe needed to take a step back and view the program for what it is — a program with a long history and an important role to play in the future,” Lynch said. “It was really great to see them gaining some confidence, and I hope that can lead to better claiming decisions and more comfort about their future.”
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