Financial Planners, Clients Disconnected on Social Security Claiming
New research reveals missed connections on how individuals and financial professionals perceive planning for Social Security.
The findings, from Protective Life Corporation, a U.S. subsidiary of Dai-ichi Life Holdings, Inc., found that while consumers associate Social Security planning with feelings of “security,” “optimism,” and “hope,” financial professionals say their clients have felt “confusion,” “skepticism,” and “anxiety,” when devising a Social Security plan with them.
Advisors are likely right in their sentiments, as one-third of consumers admit feeling unsure on when to claim Social Security benefits. The hesitancy signals an opportunity for advisors to offer proactive guidance to clients, Protective suggests.
“This disconnect represents an opportunity for financial professionals,” said Aaron Seurkamp, SVP and president of the protection & retirement division at Protective. “By commissioning this research, Protective remains committed to empowering financial professionals with the tools they need to proactively address retirement concerns and deliver more comprehensive financial solutions.”
Protective’s findings underscore four key steps to promote Social Security planning. Along with saving more and seeking advice from planners, the findings recommend clients pursue other sources of income in retirement and advises professionals to kickstart additional discussions about retirement income with a client’s loved ones.
Financial professionals who have these conversations with clients say they generally begin discussions five to 10 years prior to retirement. The age at which clients start these conversations could range anywhere from their late 40s to mid-50s, as the actual median retirement age was 59 years old, Protective reports.
“Start a discussion about Social Security and strategies about when to claim approximately five to ten years before the client intends to retire. These discussions reap many benefits, including motivating more saving and leading to better outcomes,” the research states.
Financial professionals who discuss Social Security claiming say clients are particularly concerned with insolvency (46%) and the risk for reduced lifetime income benefits if they don’t live long enough (46%). Other common concerns include fears over missed opportunities for immediate income (36%), perceived loss of benefits if the system changes (30%), increased stress about waiting and managing expenses (23%), and the need to work until they can claim Social Security benefits (22%).
Protective’s research also highlighted solutions for those who retire before claiming Social Security and explained how planners can help them “bridge” income prior to receiving benefits. These strategies include withdrawing from taxable investments (64%), using liquid savings (61%), utilizing retirement savings like 401(k)s and individuals retirement accounts (IRAs), working part-time or consulting, implementing Roth IRA withdrawals (34%), and withdrawing from deferred annuities (29%).
Consumers also face challenges when planning for benefits, like feeling uncertain about future financial needs (38%), emotional factors (29%), lack of understanding about Social Security rules and options (20%), uncertainty in understanding how age affects benefits (20%), difficulty in estimating benefits accurately (16%), and limited access to reliable resources or guidance (6%).
When asked what tools and materials would aid them to make decisions about claiming, 65% responded that calculators would help them estimate benefits. Many also requested step-by-step instructions for applying benefits (57%), detailed guides on when and how to claim Social Security (57%), FAQs or common mistakes to avoid when claiming benefits (53%), resources on maximizing lifetime benefits (51%), and information on how Social Security fits into overall retirement planning (54%).
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Amanda Umpierrez is the Managing Editor of 401(k) Specialist magazine. She is a financial services reporter with nearly a decade of experience and a passion for telling stories and reporting news. She is originally from Queens, New York, but now resides in Denver, Colorado.
