Not Your Grandmother’s Retirement: Demand for Social Security Support Rising

According to a study published in early July, 2014, financial advisors want more tools and training to help clients with complex Social Security options.

The topic, which has become increasingly popular among industry trade writers, financial advisors and their clients, shines a spotlight on the once overlooked retirement income vehicle that, with the right planning and distribution strategy, could help clients realize 6-8% growth on their principle payout each year.

Today, more than 9 out of 10 advisors provide retirement-ready clients with some level of support in effective claiming strategies for Social Security distribution, though most also admit that they need to enhance their knowledge and skills on this increasingly important topic, according to the report.

Why? Let’s look at the numbers.

• According to the Social Security Administration, the number of individuals receiving Social Security benefits as part of the Old-Age and Survivors Trust (not including Disability benefits) payable to retired worker and auxiliary beneficiaries as well as survivor beneficiaries, has more than doubled in the past 30 years.
• In 2014, more than 59 million Americans will receive almost $863 billion in Social Security benefits.
• Baby boomers, including people who came to the United States from other countries, represent close to one quarter of our entire US population.
• And in 2011, the AARP reported that the first of the baby boomer generation reached what used to be retirement age, 65, and that each day, for the next 18 years, about 8,000 more boomers would hit that milestone.

Do the math on that last one and you’re looking at (about) 52,560,000 retirees or near-retirees. That’s more than the entire populations of countries like South Africa, Spain, South Korea and Columbia, and only about 12 million less people than the population of Great Britain. Without jumping to conclusions, it looks like there might be a fair amount of opportunity here—not only for clients, but also for the advisors who provide guidance on strategies for maximizing retirement income, including a Social Security benefit.

Clients are catching on.

According to some experts, delaying Social Security distribution and/or properly accounting for marital status and spousal benefits can dramatically increase retirement income, and have a significant impact on lifestyle in retirement, if modeled correctly.

But the math, as well as the options, behind claiming Social Security benefits is pretty complicated, so individuals on their own were not taking full advantage of their options they had. And for a while, some advisors serving the high-net-worth bracket dismissed Social Security benefits as “a supplemental income only for retirees with fewer assets.” Today, many investors at all levels are realizing they can take advantage of a rare instance of fiscal generosity by our government, and are looking to their advisors for guidance on strategies that guarantee the optimal payout.

Now, advisors are too realizing the benefit of offering more Social Security support.

Based on feedback from more than 600 financial advisors from full-service brokerages, RIAs, planning firms and bank representatives, the report further shows that advisor demand for increasing the level of Social Security support offered is also high. Three out of four advisors are likely to seek training or tools to improve their Social Security offerings in the next year, with most perceiving the delivery of Social Security support as a means of deepening relationships with their clients.

Other advisors are also seeing this as a business opportunity to better serve the middle-income and mass-affluent markets, particularly as investor options for self-guided solutions grow every day, and having real discussions on how Social Security income fits into a retirement plan.

Having the right tools in place.

Later this year, eMoney will release its latest software update. In addition to a completely redesigned look and cleaner, more intuitive navigation options, the update also will feature a slew of system upgrades, including major improvements to Social Security planning.

“Our Social Security enhancements will enable advisors to compare Social Security strategies and options and determine which situation is going to be most advantageous for their client,” said a member of the product development team leading the charge on eMoney’s Social Security enhancements. “We’ll be able to support the file and suspend concept more thoroughly, as well as better illustrate how to take advantage of restricted spousal benefits.”

Shown as a graph, advisors will be able to see and manipulate the cumulative amount clients can expect, as well as the break points for when one strategy beats out another.

Professional reports aside, the decision to improve the functionality of this component of the tool is a direct result of feedback from eMoney users.

“We come to work every day to in order to provide our advisors with the tools they need to be successful for their clients—bottom line,” said an eMoney product manager leading the charge on Social Security enhancements. “Our advisors should feel confident that we will continue to respond to their changing needs. This system upgrade is just one example of how we do that.”