Marc Kiner has two thoughts about Social Security.
The first is that the entitlement program isn’t going away anytime soon, despite what advisors read in the headlines. The second is that Social Security must change drastically in order to survive.
Kiner, president of Premier Social Security Consulting in Cincinnati, will conduct a presentation on Social Security claiming strategies at the National Association of Insurance and Financial Advisors (NAIFA) 2015 Career Conference and Annual Meeting in New Orleans. He discussed his thoughts on Social Security with InsuranceNewsNet in advance of his presentation at the conference.
Kiner floated these facts: Last year, Social Security paid out $863 billion in benefits, more than double the payout 14 years ago, he said.
Disbursements can’t go on for much longer at that rate, he said. But until leaders in Congress decide what to do about Social Security, it’s incumbent on advisors to brush up on taking maximum advantage of what is in fact the nation’s largest annuity program — before Congress tinkers with the popular entitlement.
The most frequent question advisors hear from clients is: “When is it best for my spouse and me to begin Social Security withdrawals?” Kiner told InsuranceNewsNet.
Advisors must become familiar right away with what Kiner and his colleague Jim Blair call the “three-legged stool” of maximizing Social Security benefits for married couples. Blair, who spent 35 years working for the Social Security Administration (SSA), was scheduled to join Kiner in his conference presentation.
The three legs consist of one spouse delaying withdrawals until age 70, coordinating and timing the spousal benefits, and maximizing surviving spousal benefits, Kiner said.
“If advisors can incorporate all three legs, the client will get the most out of Social Security,” Kiner said.
Blair, who now serves as a consultant with Premier Social Security Consulting, said that the most important leg of the stool revolves around coordinating spousal benefits incorporating a “claim and suspend” approach and a “restricted application” strategy.
Claim and suspend involves filing an application for Social Security benefits but suspending the mailing of the checks, allowing the spouse to file for spousal benefits.
The restricted application approach allows workers to file only for spousal benefits even if the worker’s own benefits would be higher. This allows the worker to wait until age 70 to draw their own benefits to take advantage of delayed retirement credits, Blair said.
A coordinated Social Security withdrawal approach can boost income by as much as 32 percent, Blair said.
Over a 25-year withdrawal period, the difference can amount to tens of thousands of dollars. The strategy is a far more effective way to boost Social Security income and fight inflation than relying on the small annual cost of living increases of 1.5 percent to 1.7 percent to which recipients are entitled anyway.
Thus the need for a shrewd withdrawal approach.
In other words, the closer financial advisors hew to the stability of a three-legged stool strategy, the more “beer and chicken wings” for clients in their golden years, Kiner said.
Blair said that he conducted a training seminar on claim-and-suspend with 17 certified public accountants this week. Only two of the CPAs had heard of the strategy and none had heard of the restricted application approach, Blair told InsuranceNewsNet.
A Social Security withdrawal strategy is incumbent on financial advisors as most consumers admit they are lost when it comes to optimizing Social Security withdrawals.
Only 9 percent of consumers said they were “very knowledgeable” about how their Social Security benefits would be determined, according to an AARP survey of 1,215 people between the ages of 45 and 64.
Kiner and Blair also briefed advisors on the earnings test, benefits available to widows and widowers, how to determine eligibility, how benefits are calculated, and how to make sense of the all-important Social Security statement that appears in recipients’ mailboxes.
“They have a number of options available to them, but those options decrease and most of them go away as soon as they apply for their Social Security benefits,” Blair said. “It’s important they do their homework and understand Social Security before they apply.”
No advisor should wait until the last minute to figure out a Social Security strategy for clients, Blair said. That’s because advisors who pepper the Social Security Administration staff with questions won’t reach outcomes that are in their clients’ best interests.
Nearly every Social Security withdrawal expert has a tale of poor advice dispensed by the labyrinthine SSA bureaucracy.
“Even if you bring it up to them, they (SSA) may not understand,” Kiner said.
InsuranceNewsNet Senior Writer Cyril Tuohy has covered the financial services industry for more than 15 years. Cyril may be reached at [email protected].
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