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Retirement Planning

Social Security dates your clients can’t afford to miss

There are several key Social Security dates that your clients can’t afford to miss. Social Security is a significant source of income for most retirees, but it’s hard for clients to understand their benefits and make smart choices. The Social Security Administration doesn’t give retirement advice, and clients can get bad information from several places: friends and family, online sources, or even Social Security Administration employees.

You’re in a position to add value to client relationships and help people take advantage of the benefits they paid for over their working years. Especially as clients age and cognitive decline becomes an increasing problem, clients benefit from your proactive guidance.

Key Social Security dates for clients

Help ensure a smooth transition to retirement by keeping clients informed about important milestones related to their benefits. You can even use those opportunities to impress your clients with great customer service. Create reminders in your contact management system and make an extra “touch” as these dates come up.

Children under age 18 

Clients may be surprised to hear that Social Security isn’t just about retirement. Children under the age of 18 can receive survivor benefits on a deceased parent’s record, and they can also take benefits when a parent qualifies for a retirement benefit.

Application date 

No matter when clients decide to start taking benefits, they should start the claiming process early. The Social Security Administration suggests submitting an application three months before you want payments to begin. As part of the application process, clients may need to provide official documents like birth certificates, Social Security cards, proof of citizenship, and tax records. It takes time to gather those materials, and any requests for verification add extra time.

Age 60: Widows and widowers can take benefits on a deceased spouse’s record as early as age 60 (or age 50 if disabled). However, benefits are reduced at this age, so it may be better to wait.

Age 62: Workers can begin taking Social Security retirement benefits as early as age 62. Again, claiming “early” results in benefit reductions—possibly by as much as 30%. While it may make sense for some retirees to claim early, others do much better by waiting. It’s hard to overstate the impact of a reduced benefit:

  • A reduced benefit will last for the rest of the retiree’s life.
  • A surviving spouse switching to a deceased worker’s benefit will also be stuck with that reduced payment.
  • Any cost of living adjustments will be based on that smaller number.

Discuss the pros and cons of claiming early before your clients get their hearts set on anything.

Age 65: Clients who receive Social Security retirement benefits before turning 65 typically get enrolled in Medicare automatically, but there are exceptions. When clients wait until after age 65 to claim, they need to evaluate Medicare coverage and decide if enrolling makes sense. For full Medicare coverage, clients must enroll during the three months preceding their 65th birthday—waiting could result in higher costs or a gap in coverage. For clients with group health coverage, it’s essential that they discuss their benefits and Medicare decisions with their current insurance providers before signing up. 

Full retirement age

A client’s full retirement age is the earliest age at which the client can take unreduced benefits. In addition, earnings limits no longer affect working retirees after full retirement age. Traditionally, that was age 65, but full retirement age is higher for those born after 1937.

  • For individuals born between 1943 and 1954, full retirement age is age 66.
  • For those born in 1960 or later, full retirement age is age 67.

Clients don’t have to start taking benefits at full retirement age. They’ll get a higher monthly benefit if they wait.

Age 70: When clients postpone taking benefits, they earn delayed retirement credits, and the monthly retirement benefit amount increases until age 70. That increase amounts to 8% for every year of waiting (calculated monthly and full retirement age of 66) and is one of the few remaining strategies available to maximize Social Security income. Any cost of living adjustments start from that increased benefit amount, and surviving spouses can also switch to that payment (assuming it makes sense to do so). 

Impact on lifetime income

Even if clients don’t hit any of the Social Security dates above in a given year, encourage them to review their Social Security statements annually. They need to ensure that information on the statement is correct, and that all earnings have been recorded with the Social Security Administration.

Help clients understand the impact of decisions they make with regards to Social Security dates. The Social Security Administration provides calculators and guides online, and it may be helpful to sit with clients to show them several “what if” scenarios of missing Social Security dates.

For example, a client born in 1956 reaches age 62 in 2018. That client can take retirement benefits at age 62, but the benefit will be only 73% of the client’s full retirement age benefit. If the client waits until age 70 to claim, the monthly payments will be 129% of the full retirement age payments.

For quick reference for important Social Security dates, SSA.gov provides a handy cheat sheet that you may want to reference in conversations. It shows:

  • Full retirement age, based on the client’s birth year
  • Percentage of Primary Insurance Amount (PIA) payable when clients claim early or late
  • Annual percentage “raise” that clients earn for delaying benefits, based on the client’s birth year

Without seeing the numbers, clients may be tempted to make bad decisions that they (and surviving spouses) will have to live with.

 

SM.741660.10.17

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