Nearly half of financial advisors (46%) are worried about the Social Security program drastically cutting their older clients’ benefits, according to a new survey from The American College of Financial Services.
The survey of 245 financial advisors with the Retirement Income Certified Professional (RICP) designation focuses on the financial future of Social Security and how that affects their clients.
Older clients are plenty worried about the possibility of a significant Social Security benefit cut, as the survey found two-thirds (67%) of RICP-holding financial advisors with older clients say their clients are moderately worried that the Social Security program will drastically cut benefits in the future.
Social Security’s trustees say in their 2019 Annual Report the program’s trust fund is scheduled to run out of money in 15 years if nothing else is done. In 2035, Social Security’s annual income will only be enough to pay about three-quarters of scheduled benefits, which would mean a 25% cut in benefits.
The current average Social Security benefit for a retired woman of 65 is $14,184 a year, and $18,000 for men the same age.
Per The American College study, more than 8 in 10 (84%) of RICP-holding financial advisors with older clients say cutting Social Security benefits by 20% today would drastically alter their clients’ lifestyles.
“This survey reveals that RICP advisors believe that Social Security is still a good investment. On average 81% of advisors’ clients are taking Social Security after age 65 with only 9% of their clients taking it the earliest age. This is drastically different from the national average with 35% of men and 40% of women claiming their benefits at the age of 62,” says Colin Slabach, Assistant Director, The American College New York Life Center for Retirement Income.
The survey also asks an open-ended question about client misconceptions around Social Security. “The vast majority of the misconceptions fall into one of four categories: spousal benefits, when you have to start taking Social Security, the cost-of-living adjustment, and taxation,” Slabach notes.
Steve Parrish, Co-director of The American College New York Life Center for Retirement Income, says the survey reveals an important opportunity for advisors to work with their clients.
“Opinions vary greatly among both consumers and their advisors, but the responses tell us two things. First, Social Security is a very important benefit for older clients and second, there is concern about what will happen if the Social Security program experiences cuts,” Parrish says.
“These concerns indicate that advisors need to monitor the political landscape to ascertain whether Social Security benefits may be reduced in the future, and they need to work with their clients now to have plans in case cuts indeed occur.”
Veteran financial services industry journalist Brian Anderson joined 401(k) Specialist as Managing Editor in January 2019. He has led editorial content for a variety of well-known properties including Insurance Forums, Life Insurance Selling, National Underwriter Life & Health, and Senior Market Advisor. He has always maintained a focus on providing readers with timely, useful information intended to help them build their business.
