Category Archives: Social Security

More Social Security Mistakes

My Comments: Did you know you can choose from any one of 96 months to start your Social Security benefits? If you live to normal life expectancy, your choice of month can mean as much as several extra $100k for you and your family. The message: don’t sign up without first exploring what is in your best interest.

Sandra Block, July 30, 2015

Social Security will probably represent a big part of your retirement income.

One common mistake is to use the wrong retirement age when deciding when to file for benefits. Many people think that they’ll be eligible for full benefits at age 65, but that’s not always the case. If you were born between 1943 and 1954, your full retirement age is 66. Starting with those born in 1955, full retirement age will gradually rise in two-month increments to age 67 for people born in 1960 or later.

Why is this important? Once you reach full retirement age, you can claim your full Social Security benefit. Claim earlier and your benefits will be reduced. In addition, once you reach full retirement age you can earn as much as you want without forfeiting some of your Social Security benefits.

A second mistake is to ignore how filing for benefits will affect your spouse. There are several things married couples can do to increase their combined benefits. For these strategies to work, you must coordinate the timing of your claims. For example, the higher earner could delay filing a claim until age 70. Meanwhile, the other spouse could claim a spousal benefit, providing some income in the meantime. If you’re the higher earner, the timing of your claim could also have a big impact on the amount of benefits your spouse will receive if you die first.

Finally, if you filed at 62 and now regret it, don’t overlook the possibility of a do-over. You can withdraw your application within 12 months of the date you filed, pay back your benefits, and restart at a higher amount later. If you’ve already passed the 12-month mark, you still have options. Once you reach full retirement age, you can voluntarily suspend your benefit. You’ll earn delayed retirement credits until you start claiming benefits again.

This is just the tip of the iceberg. There are many more costly Social Security mistakes that you need to avoid in order to maximize your retirement benefits. Read more HERE.

Social Security Mistakes That Can Be Fixed

Social SecurityMy Comments: With so many of us soon to retire, and the not so obvious complexity of Social Security, there comes a time for many when decisions made ask for a redo. Some are possible and this short article describes some of them. If you have yet to claim benefits or are less than 12 months into the system, you will want to read this.

by Dave Lindorff JUL 23, 2015

They say you can’t fix the past, but when it comes to Social Security, sometimes you can.

Granted, it used to be easier. Until December 2010, if clients had begun collecting benefits at 62 and then decided it was a mistake, they could fix it by simply repaying all the benefits already received, even if it was six or seven years later. Filers didn’t even have to pay interest on all the money they’d received — a situation that had some advisors actually recommending this as an interest-free loan strategy. But Congress eventually closed the loophole.


Now, a client who retires and claims benefits at 62 can still reverse that decision within 12 months, repaying the benefits received without penalty and then waiting longer in order to get higher benefits. But after 12 months, this is no longer allowed.

The 12-month window is good news, though, because as Alicia Munnell, director of the Boston College Center for Retirement Research, notes, while many of those who file early may have to if they have no savings and no other source of income, many others, including clients who may come to see you, simply filed at 62 because they mistakenly think “if you retire from your job you should file for your benefits.”

Munnell argues that can be a costly mistake for those who have other options — whether it’s working longer or tapping savings. Waiting until the so-called “full retirement age” of 66 (for those born before 1960), will increase one’s benefits by a third. In other words, someone who would only receive $750 a month at age 62 would get $1,000 per month for life by waiting until age 66 to file. Waiting another four years to the maximum age of 70 for filing would add another 8% per annum to that amount, bringing the benefit in that example to $1,320 a month in constant dollars.


But there are several other situations where Social Security allows a redo.

One involves the “file-and-suspend” option. This is where a married couple with two earners opts to have one spouse, usually the higher earner, file for benefits at full retirement age but then suspend those benefits until age 70. This move allows the other spouse to start collecting spousal benefits on the first spouse’s account, while leaving his or her own account to continue growing untouched until age 70, when the benefit is maximized.
But if the person who filed and suspended has a change in circumstances — say a case of terminal cancer or sudden unanticipated expenses — they can still make changes. In that event, the person can cancel the file-and-suspend and Social Security will pay out all the foregone benefits as a lump sum, calculated at the benefit level the individual would have received them beginning at age 66 (there would be no interest paid). Of course, going forward, this person would receive benefits based on her or his age at the time the file-and-suspend was cancelled.


Another area where a client can redo a Social Security decision is spousal benefits. The spousal benefit, for someone who begins taking it at 66, is 50% of what the spouse whose account is used is receiving. For example, if a husband at 66 is eligible for $2,000 per month and files and suspends benefits, his wife, also 66, could start collecting a spousal benefit of $1,000.

But say the wife was already eligible to receive $1,500 on her own account by that time and was just leaving that untouched to let it grow to the age 70 level. A year later, the couple might decide they need that extra money to live on, which by then would be 8% higher, or $1,620 per month. At that point, or at any time before reaching 70, the wife could simply cancel her spousal benefit and switch over to her own account.

Finally, for those who’ve married and divorced more than once, there is the option of changing which ex’s account to collect benefits on. Say a single woman was married for 12 years to one man, and for 15 years to another. She could collect benefits on the first spouse’s account, if he was already 66, but later, if it turns out the other spouse had waited until 70 to start receiving benefits, she could switch to that spouse’s account for her spousal benefits. The same would apply to survivor benefits if one or both of those exes was deceased.

Dave Lindorff spent five years as a China correspondent for Businessweek, and has written for The Nation and

Social Security: When to Claim at 66

SSA-image-2My Comments: Many of my close friends, clients and associates have long since started taking their Social Security benefits. For those of you who have not, there are probably some issues you need to explore before you sign on the dotted line.

A generation ago, 65 was the automatic full retirement age. Rembember the phrase Full Retirement Age or FRA; it’s that point in time when it first all comes together for you. Based on your past contributions to the system, the FRA represents the base line number to determine how much you’ll receive for the rest of your life.

Start at age 62 and you get considerably less; wait until age 70 and you’ll get a lot more. But there’s a catch. You have to remain alive to get more since the SSA is not going to intentionally send a monthly amount if you’re dead.

I have access to software that will help you explore the various options, and there are more than you think, that will help you make the best timing decision less confusing. Here are a few to start you thinking.

by Donald Jay Korn JUL 6, 2015

“It’s most common for our clients to begin Social Security benefits at age 66,” says Brandon Jones, a senior wealth manager at Accredited Investors, a fee-only planning firm in Edina, Minn.

If sexagenarian clients still have substantial earned income, starting earlier would trigger an earnings penalty. When they reach 66, seniors now reach “full retirement age (FRA),” for Social Security purposes. (Any reduction in cash flow from the earnings penalty may be temporary, as seniors subsequently will get makeup benefits.)

“At 66, someone can earn any employment amount and still receive the full Social Security benefit,” says Marilyn Capelli Dimitroff, director of wealth management and principal at Bloomfield Hills, Mich.-based Planning Alternatives, a wealth advisory firm.

“Therefore, the 66-year-old who waited receives a significantly higher monthly check than the 66-year-old with the same earnings record who began payments at 62, the earliest starting date. The differential continues for life.”
Starting at 66 avoids the 25% benefit reduction imposed at age 62, so the early bird with a $1,800 monthly check could have received $2,400 a month by waiting until 66.

“For the majority of people, postponing the receipt of Social Security to at least FRA is a smart move,” says Dimitroff. “Most seniors will need to work to 66 or later to maintain financial security in very old age.”

Waiting even longer, until as late as age 70, would increase benefits even more, yet many clients start at 66 anyway. “We human beings value a ‘bird in the hand,'” says Dimitroff, so some people want to collect from Social Security as soon as practical.

In addition, Dimitroff notes, monthly Medicare premiums are due for many people, starting at age 65, and it’s easier to have the payments subtracted from Social Security direct deposits rather than writing checks periodically. “A third reason for starting at 66,” she says, “is that most people underestimate how long they are likely to live.” Some people just invest their unneeded Social Security checks, she adds, hoping to exceed the 8% annualized increase they would have received for waiting beyond age 66.

Moreover, 66 can be a key milepost for spousal claiming strategies. For married couples, says Dimitroff, delaying the benefit start from 62 to 66 increases the spousal benefit as well as the worker’s benefit.

“For a one-earner couple,” says Jones, “we may recommend that the earning spouse file at FRA and immediately suspend the benefit, allowing the other spouse to begin claiming a spousal benefit. Meanwhile, the earning spouse’s benefit continues to grow, with the intent of beginning benefits at age 70.”

Jones adds that a similar strategy can work if one spouse has considerably more lifetime earnings than the other spouse.

A Basic Social Security Quiz…

Social Security cardMy Comments: Many are railing against capitalism these days and others against socialism. If you’re adamantly opposed to socialism, I trust you’ve refused to cash your social security checks. Yes, you paid into the system, but the bulk of the money you get comes not from what you put in, but from what our children have put in.

While I believe strongly in capitalism, I thoroughly appreciate the monthly check my wife and I receive from the Social Security Administration. Yes, it shifts some of the financial burden to future generations, but it today represents a social contract we have with the United States. I’ll work hard to help clients and others understand how it exists to help them survive if the need is there.

By Jamie Hopkins – 6/17/2015

Most Americans do not properly understand their Social Security options and it’s not a surprise to the financial services industry. A new survey of roughly 1,500 Americans was conducted by KRC Research on behalf MassMutual and found that 72% of respondents could not pass a true or false ten question quiz on Social Security.

In fact, the lack of knowledge about Social Security is consistent with a comprehensive retirement income literacy test, the RICP® Retirement Income Survey, which was conducted by The American College and found that only 20% of Americans could pass the test but that a slightly higher amount understood Social Security.

Perhaps more troubling was that 62% of the survey respondents over age 50 failed the test. This is a group of people that will rely heavily upon Social Security in retirement, as nearly 1/3rd of current retirees rely almost solely upon Social Security for their retirement income. This highlights an important finding in the MassMutual survey as only 15% of respondents expect to rely solely upon Social Security, which indicates that many people misunderstand how important Social Security is to their retirement income. This age-group should be focusing on retirement planning.

However, many are ill-informed about their main retirement asset, Social Security. This lack of knowledge creates an environment for making uniformed decisions that could detrimentally impact one’s retirement. “Americans who lack the proper knowledge and information about Social Security may be putting their retirement planning in jeopardy,” said Phil Michalowski, Vice President, U.S. Insurance Group, MassMutual. “In fact, many may be leaving Social Security retirement benefits they’re entitled to on the table, or incorrectly assuming what benefits may be available in retirement.”

The full MassMutual Social Security survey is available to take here, now let’s take a look at a few of the most important questions that were misunderstood by the respondents.

1. Social Security Full Retirement Age:

“Under current Social Security Law, full retirement age is 65.” This statement is false. According to the survey, nearly 71 percent of respondents answered this question incorrectly. This can be confusing for many people as full retirement age under Social Security was 65 in the past and many of our parents might have retired when the full retirement age was 65. Additionally, Medicare eligibility starts at age 65, which creates an anchor point in many people’s minds that full retirement for Social Security benefits is also age 65. However, full-retirement for Social Security benefits varies based on the year in which you were born. For those individuals born from in 1943 until 1954, their full retirement age will be 66. For those born in 1960 or later, the full retirement age for Social Security benefits is age 67. It is important to understand your full retirement age for Social Security benefits because if you claim benefits before full retirement age the amount of money you receive could be permanently reduced.

2. The Earnings Test:

“I can continue working while collecting my full Social Security retirement benefits – regardless of my age.” This statement is False. Nearly 56 percent of respondents did not answer this question correctly. Again, it is important to understand your full-retirement age. If you have claimed Social Security benefits prior to full retirement age and are still working and you earn too much then your Social Security benefits will be currently reduced under the earnings test. This does not penalize the worker as much as many think as benefits lost under the test are essentially restored by a recalculation of benefits at full retirement age. Also, once you reach your full retirement age, the earnings test no longer applies, and you can both have earnings from employment and receive Social Security benefits.

3. Spousal Benefits:

“My spouse can qualify for Social Security retirement benefits, even if he or she has no individual earnings history.” This statement is True. Social Security provides spousal retirement benefits for spouses of workers eligible for Social Security retirement benefits. The amount that the non-working spouse is eligible for under Social Security is based on the working spouse’s full retirement benefit, and the age of the spouse. To receive the maximum benefit, the spouse has to attain full retirement age before claiming. Benefits are reduced if benefits are claimed between age 62 and full retirement age.

The Federal Government has put resources and significant efforts into helping people better understand their benefits and the United States Social Security Administration has great resources online to help better understand your benefits and claiming options. However, Americans still need a lot of help making important retirement decisions. According to Michalowski, one of the goals of the MassMutual survey was to bring increased awareness and education to people around the importance of Social Security benefits. In fact, MassMutual has developed online material to help consumers with understanding some basics of Social Security. Ultimately, Michalowski believes that financial professionals need to play a serious role in helping Americans better understand Social Security by working with clients and making sure they have the knowledge to make informed decisions regarding their retirement. This also means you need to ask your financial adviser questions about Social Security, find out about your benefits, and don’t leave anything on the table because you didn’t ask the right question or didn’t understand your benefits.

Social Security: Stronger Than Most Realize

Social Security cardMy Comments: This article was directed at advisors who provide financial advice to those who are starting to take their Social Security benefits. This includes me, both as an advisor and recipient of benefits.

I’ve long maintained that periodic tweaking of the rules, similar to what has happened in the past, will serve to make the system viable for years and years. Mankind has evolved over the millennia, as has society and the rules we select to govern ourselves. I believe the benefits of this program far outweigh its costs. Assuming a rational (and elderly) electorate, it will continue to be viable without major changes.

by Dave Lindorff / APR 29, 2015

When one advisor told her client that she may have to work longer than she intended, at a job that she really didn’t like, the client was dismayed. She knew she had meager savings stashed away in an IRA, but she had been counting on her Social Security benefits to make up the shortfall. “My advisor told me that it’s possible that when I’m in my 80s, Social Security might only be able to pay 75% of the benefits I’m expecting to get,” she explains.

News stories predicting the demise of Social Security, or that the program’s $2.6 trillion trust fund will run out in 2033 are legion. Advisors often warn their clients that they shouldn’t count on anticipated Social Security benefits as part of their retirement package.

But there are also experts who say that rumors of the program’s death have been greatly exaggerated. They argue that Social Security, a program that began back in 1935, and that has never missed a payment, is unlikely to be left short of funds by Congress. In fact, the same boomers who are seen as taxing the system’s ability to pay are the very ones who will make the already influential senior lobby about 50% larger and significantly bigger as a share of the total electorate in 15 years. That suggests Social Security will have an increasingly powerful lobby working on its behalf as time goes by.

If advisors genuinely doubt Social Security’s ability to pay promised benefits, they should be discounting those benefits in recommending savings and investment programs to clients. But if they’re wrong to worry, and Social Security is actually a sound bet, such a conservative strategy could be encouraging clients to save more than they need or work longer than they have to.

Jim Holtzman, an advisor with the Legacy Group in Pittsburgh, says while benefits are probably secure for people already retired or nearing retirement, he is concerned that Congress might not fix the projected shortfall that would hit in 2033, when without any fix, the program would only be able to pay 77% of promised benefits. Another worry? That politicians might fix things by reducing benefits for future retirees who are younger. “We typically factor in only 50% of estimated Social Security benefits for our younger clients because of that uncertainty,” he says, “and some of them tell us we should just leave Social Security out all together.”

That’s taking a lot of money off the table when planning for most people’s retirement needs. The average Social Security benefit in 2015 is $1,218 per month, or $14,616 per year; $29,232 per year for couples.

Michael Kitces, a partner and director of research at Pinnacle Advisory Group in Columbus, Md., says, “The idea of telling people of any age that Social Security won’t be around for them when they retire is [very misguided]. And even the idea that benefits are going to be cut when the trust fund is run out is absurd. It’s not a political reality. Just a 3% increase in the payroll tax—1.5% for employees and 1.5% for employers—fixes the system for the next 100 years.”

Problems with Social Security in the past were even more drastic yet were fixed in time, notes Rob Kron, head of retirement education at BlackRock.

“In 1983, Social Security’s funding was up against a wall. It was within a year of running out of money, which would have meant benefits would have to be paid just from the money coming in from the payroll tax of current workers.” President Reagan and Congress fixed things by gradually raising the full retirement age from 65 to 66 and eventually, for those born after 1960, to 67, and by increasing the payroll tax in steps.

Kron adds, “I’m confident Congress will eventually do something this time too. I certainly wouldn’t tell anyone to count on a reduction of benefits in 2033, but I encourage young clients to focus not on Social Security, but on saving.”

Peter Diamond, emeritus professor at MIT and Nobel laureate in economics, has, together with a colleague, Peter Orszag, vice chairman of corporate and investment banking and chairman of the Financial Strategy and Solutions Group at Citi, and former head of President Obama’s Office of Management and Budget, assembled a list of ways that Congress could fix Social Security.

Diamond acknowledges the system does need some Congressional tinkering, but says a solution needn’t be that costly or disruptive. Among the suggestions the two have made:
• Raising the FICA tax by 1.2% on employers and employees each, a small bump which would fully fund Social Security for the next 75 years.
• Raising or eliminating the cap on income subject to the payroll tax—currently set at $118,500 and adjusted annually.
• Raising the full retirement age slightly to account for increases in longevity.
• Lowering benefits slightly for wealthier Americans.

The important thing is that the sooner Congress acts, the smaller the fixes have to be, since there is a longer time for those fixes to rebuild the trust fund, says Diamond. Diamond notes that Social Security, since its inception in the New Deal, has “always operated in crisis mode.” He explains, “When Social Security was created, Republicans were heavily opposed. When President Clinton proposed putting some trust fund monies into an index fund, Alan Greenspan said it ‘threatened our freedom.’ So whatever we do with Social Security will be the usual compromise between what people want as beneficiaries, and those who are ideologically opposed to the program.” But he adds, “No politician will say they are in favor of cutting Social Security benefits for anyone.”

In terms of how advisors should deal with the issue of Social Security’s future benefits, he says, “Anyone who would significantly discount the value of estimated Social Security benefits or count them as zero is misguided. If you’re going to make predictions about a client’s portfolio, the stock and bond markets dwarf any risk concerns about Social Security benefits. And it’s not as if your 401(k) or your IRA are totally reliable either.”

Stephen Goff, chief actuary at the Social Security Administration, notes that company pensions are almost gone, and personal savings have also taken a hit this century, with a “lost decade” in 2000-2010 for stocks, and a decline in home equity values. That makes Social Security more critical for the nation’s elderly and disabled.

Social Security is secure enough that, far from discounting future benefits, Alicia Munnell, director of Boston College’s Center for Retirement Research, argues that advisors should recommend to any clients who are feeling financially strapped and thinking of taking their benefits early, to draw on other investments, even 401(k) or IRA funds, and wait until 70 to get the maximum benefit.

Kitces agrees, saying that simply waiting until 70 to collect can be “the best long-term return money can buy.” Indeed, for an average middle-class person age 66 with $1,800 monthly Social Security benefit, matching that with a privately issued annuity that has an inflation adjustment and spousal benefit, according to Fidelity Investment’s online annuity calculator, would cost $500,000.

As BlackRock’s Kron notes, to the extent that Social Security benefits can cover a client’s or couple’s expenses, they are free to take more risk with their invested assets.

QLACs Change the Game in Social Security Timing

income taxMy Comments: If you know about Social Security plannning, as I claim to do, the prevailing wisdom is to delay taking your benefits for as long as possible. The argument is that each year you wait, you increase the size of your payments by 8%, even before the expected annual increase due to inflation.

What is often overlooked here is that your life is finite, just unknown. Waiting a year means you may ultimately leave some of your Social Security money behind. It only works if you live beyond your expected lifetime. The second overlooked variable is that you may be sick and tired of working and simply want to do something else, while you still can.

Introducing a QLAC into the planning allows you to take your SSA benfits sooner and use deferred taxes to offset the lower payments in later years, assuming you are still alive.

By Robert Bloink, and William H. Byrnes February 24, 2015

Qualified longevity annuity contracts (QLACs) have, in theory, existed for nearly three years, but it’s only in recent months that insurance carriers have begun to offer these products—finally making the QLAC a realistic planning option.

While the purpose behind the QLAC is relatively simple—providing income guarantees late in a client’s life—in reality, this new planning vehicle can reshape the client’s entire retirement income planning strategy. QLACs won’t replace Social Security as the primary source of retirement income for many clients but, for the higher income client, the introduction of QLACs into the planning mix can drastically alter even the most basic Social Security strategies—including the typical plan for maximizing retirement income by delaying benefits.

QLACs and Social Security: The Basics
A QLAC is an annuity contract that is purchased within a traditional retirement plan, under which the annuity payments are deferred until the client reaches old age (they must begin by the month following the month in which the client reaches age 85) in order to provide retirement income security late in life.

The value of the QLAC is excluded from the retirement account value when calculating the client’s required minimum distributions (RMDs) once the client reaches age 70 ½, though the client is limited to purchasing a QLAC with an annuity premium value equal to the lesser of 25% of the account value or $125,000.

As most clients know, waiting past the normal retirement age to begin collecting Social Security allows the client to earn delayed retirement credits, which increase the eventual benefit by 8% for each year in which benefits are suspended. Because of this special treatment, most advisors counsel clients to delay claiming benefits for as long as possible in order to ensure the maximum monthly benefit level.

QLACs and Social Security Timing

The introduction of QLACs can now allow clients who have saved for retirement to avoid delaying Social Security benefits entirely—and, because of volatility in the Social Security system and the uncertainty of a client’s lifespan generally, many clients are receptive to this idea because they are reluctant to defer in the first place.

For most clients, delaying Social Security benefits past retirement age means that withdrawals from tax-preferred accounts must increase during the deferral period in order to ensure sufficient income while maximizing the benefit level for a later time. However, this means that tax-preferred accounts are depleted at a much more rapid rate early in the client’s retirement—leaving a lower account value to grow over subsequent years.

By purchasing a QLAC within the retirement account, the client can reduce his or her account distributions and eliminate the associated income tax liability, yet still secure a higher level of guaranteed income to supplement Social Security later in retirement. If the client claims Social Security benefits early in retirement, the amount that must be withdrawn from tax-preferred accounts is reduced and a larger portion of his or her retirement savings can be left in tact to grow—generating a higher account balance in the long run.

With the QLAC, the client still has a guaranteed source of income late in life—regardless of poor market performance or unforeseen circumstances—to supplement the lower Social Security benefit level that reduced the need for high withdrawals early in retirement.

The introduction of QLACs can change the traditional rules of retirement income planning dramatically—making it important that advisors reevaluate current strategies in order to give clients the opportunity to incorporate these products into the retirement income planning playbook.

7 Social Security Mistakes to Avoid

SSA-image-2My Comments: Social Security payments are a critical financial component of many lives these days. When it began in 1935, there was much gnashing of teeth among the political parties since it represented a recognition by the government that some people needed help. This was in a world recovering from the Great Depression and watching the developing threat of Communism in the Soviet Union.

Today, many millions of us pay into the system monthly and many millions of us receive a check every month. Some of us, like a client of mine, has a permanent disability that he was born with and qualifies for help with living expenses. He has never been able to earn a living and few surviving family members to help him get by from day to day.

I readily admit to an element of socialism in this process. But I live in a world of rules imposed on us by society where society has deemed it to be in the best interest of the majority that those rules exist. Like making us all drive on one side of the road instead of at random. Think about that for a minute if you choose to believe that society should have no role to play in our lives or that socialism is inherently evil.

Okay, enough political chatter. Here’s useful information about claiming benefits from the SSA.

by John F. Wasik / FEB 17, 2015

Most clients get lost trying to navigate Social Security on their own. There are about 8,000 strategies available for couples and more than 2,700 separate rules on benefits, according to the Social Security Administration. Yet most couples don’t explore all the possibilities; as a result, they end up leaving an estimated $100,000 in benefits on the table, reports Financial Engines, an online money management firm.

For many advisors, talking to clients about Social Security often means having a brief conversation that ends with the traditional advice of “wait as long as you can until you file.” But Social Security, with its myriad filing-maximization strategies, should play a much larger role in a comprehensive planning discussion.

Consider these basic questions: How do you ensure a nonworking spouse reaps the highest possible payment? Should the higher earner wait until age 70 to receive payments? What’s the advantage of taking benefits at age 62? Should clients take benefits earlier if they are in poor health? How can divorcees claim a benefit based on an ex-spouse’s earnings?

Clearly, there are several right and wrong routes to maximizing Social Security benefits. Here are some of the most common mistakes and how advisors can address them.

1. Not planning for opportunity cost
What’s the cost of waiting to take Social Security? How will withdrawals from retirement funds impact clients’ portfolios?

Advisors need to understand how a Social Security claiming strategy will affect a client’s net worth, notes Ben Hockema, a CFP with Deerfield Financial Advisors in Park Ridge, Ill. “If you wait to take Social Security, that will mean withdrawing more money from a portfolio,” he says. “The Social Security decision involves trade-offs.”

Hockema runs Excel spreadsheets in conjunction with specialized Social Security software to show clients what opportunity costs look like in terms of lower portfolio values, displaying return assumptions with graphs.

Many financial advisors point out that the answer is not always to wait until 70 to take Social Security. You have to take a broader view.

2. Failure to consider family history
What are the client’s family circumstances? What do they expect in terms of life expectancy? Have other relatives been long-lived?

Even if answers are imprecise, the discussions can provide valuable insights into how to plan Social Security claiming, say advisors who are trained in these strategies. But it’s the advisor’s role to tease out that information, notes CFP Barry Kaplan, chief investment officer with Cambridge Wealth Counsel in Atlanta. “People often have no clue” about the best Social Security claiming strategies, Kaplan says. “It’s complicated.”

3. Not integrating tax planning

One key question to consider: What are the tax implications of a particular strategy, given that working clients will be taxed on Social Security payments?

Here’s how Social Security benefits taxation works: If your clients are married and filing jointly, and their income is between $32,000 and $44,000, then they may have to pay tax on half of their benefits. Above $44,000, up to 85% of the benefits can be taxed.

For those filing single returns, the range is from $25,000 to $34,000 for the 50% tax and 85% above $34,000. Be sure you can advise your clients on how to manage their income alongside their Social Security benefits.

4. Failing to ask about ex-spouses
Be sure to ask your clients about their marital history, understand what they qualify for and analyze how it will impact their cash flow. Was the client married long enough to qualify for spousal benefits? How much was the client’s ex making? Be sure to walk through different options with clients.

Kaplan offers the example of a 68-year-old woman who was twice divorced: “She was still working, and it had been 20 years since her last marriage,” Kaplan says. “I then discovered … a former spouse’s income that netted my client an immediate $6,216 — six months in arrears — and would result in an additional $1,036 per month until age 70, for a total [of] $30,000 in additional benefits.”

Kaplan’s divorced client was able to claim benefits based on her first spouse’s earnings, which boosted her monthly payment considerably.

5. Overlooking spousal options
A key question to ask: Does the “file and suspend” strategy make sense in your clients’ situation? In this case, the higher-earning spouse can file for benefits, then immediately suspend them, allowing the monthly benefit to continue to grow even if the other partner receives the spousal benefit.

The result: The lower-earning spouse can collect benefits while the higher-earning spouse waits until 70 to collect the highest possible payment.

6. Not taking advantage of new tools
Although specialized software packages can generate a range of benefit scenarios, only 13% of planners use subscription-based tools designed for Social Security maximization. (Most planners do have some comprehensive planning tools available, but they may not integrate Social Security scenarios.)

Most planners rely upon the free and often confusing calculators from the Social Security Administration, along with online calculators and general planning software, according to a survey by Practical Perspectives and GDC Research.

That’s despite the fact that only a quarter of planners “are comfortable enough to plan and recommend Social Security strategies to clients,” the survey noted.
A detailed conversation about Social Security may be even less likely to occur with high-net-worth clients, according to the survey.

When you approach Social Security with your clients, consider that there are multiple nuances within the system’s rules that few practitioners have studied, and these could result in higher payments. You may need some of the sophisticated tools now available.

7. Dismissing it altogether
There’s another reason clients — and often planners — don’t drill down into Social Security strategies: They don’t think it will be available in coming decades.

But don’t write it off altogether. The truth is that Social Security’s trust fund, the money held in reserve to pay for future retirees, is adequate to pay full benefits until 2033. If Congress does nothing to address the funding shortfall, the government will pay three-quarters of benefits until 2088.

And Social Security is one of the most successful and popular government programs in history, so it’s difficult to bet against its long-term survival.

David Blain, president of BlueSky Wealth Advisors in New Bern, N.C., suggests that, in addition to carefully reviewing benefit statements and earnings records, advisors should explore other aspects of Social Security, including spousal, death and survivor benefits.

“You need to take it seriously,” Blain says about integrating Social Security into a plan. “Clients may not understand it and think it’s not going to be there for them.”

John F. Wasik is the author of 14 books, including Keynes’s Way to Wealth. He is also a contributor to The New York Times and