Help your clients make the most of Social Security

Help your clients make the most of Social Security

Combining Social Security benefits with 401(k) assets can help long-term savers replace more than 60% of current income in retirement, according to a recent report from the Employee Benefit Research Institute.

While many clients are probably planning to include Social Security as a source of retirement income, they may not be aware of certain factors to consider before applying for benefits.

Here are five of the top facts to know about claiming Social Security.

1. Claiming benefits too early can cause problems.
Monthly benefits increase when you postpone claiming Social Security. Many workers sign up for Social Security before reaching their full retirement age and receive a lower benefit.

2. Couples should consider joint life expectancy.
Timing is particularly critical for couples. Historically, the primary wage earner in the household has tended to take his or her benefits before full retirement age. But this move exposes the surviving spouse to longevity risk, and if the primary wage earner dies, a lower survivor benefit for life.

3. Couples can claim benefits at different times. The provisions around spousal benefits offer married couples more choices of how to claim Social Security. Strategies such as making a “restricted application” or “file and suspend” can help couples maximize their benefits.

4. Divorced and widowed individuals have different rules. A divorced individual may receive benefits based on an ex-spouse’s earnings record after meeting certain conditions. Widows, on the other hand, may receive benefits, based on the deceased spouse’s earnings, as early as 60, but the amount increases as benefits are delayed.

5. Social Security is not guaranteed to be tax free. For retirees with moderate or higher incomes, it is likely that a portion of benefits will be taxed.

Clients should meet with a financial advisor and tax professional with knowledge of their individual financial situation before making decisions about Social Security. For more details on the five key facts and strategies mentioned, read, “Optimizing Social Security: Five things you need to know.”


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