The Finance of Longevity

Navigating Hazards on the Road to Retirement

Boomers counting on Social Security should plan for health care costs

by Dave Giertz

Mr. Giertz is President of Nationwide Financial Services sales and distribution organization, NFS Distributors, Inc. He is responsible for the wholesale strategy and distribution of private-sector retirement plans, life insurance, annuities, specialty markets and mutual funds through banks, independent broker/dealers, regional firms, wirehouses and IMO’s. Visit

Nearly two-thirds of baby boomers nearing retirement are relying on Social Security as their only source of retirement income. That’s concerning.

Not having the luxury of a pension to supplement your income in retirement makes maximizing Social Security benefits more important than ever.

Unfortunately, most see Social Security as a faucet that automatically turns on at 62. Too many people need the money right away. However, what they don’t realize is they may be missing out on hundreds of thousands of dollars in retirement income by not maximizing their benefit. Many boomers already in retirement regret their decision to take their Social Security early and wish they could start over.

New trend is happing… now

The average American claiming their Social Security benefit at 62 will spend about 61 percent of their Social Security income on health care costs. 1 This isn’t just something that will happen as America’s 76 million boomers retire over the next decade and a half. This is happening now.

In fact, according to a new Nationwide Retirement Institute® survey, unexpected health care costs have one in four current retirees wishing they waited longer to begin collecting their Social Security benefits.

More than a third of current retirees say health problems keep them from living the retirement they expected – and 80 percent of recent retirees say those health problems came earlier than expected. Health care expenses specifically keep one in four current retirees from living the retirement they expected.

For those nearing retirement, the situation is worse. Only 36 percent of the future retirees we surveyed have pensions, compared to 54 percent of recent retirees, and 60 percent of the oldest retirees. According to the Insured Retirement Institute, 45 percent of boomers (35 million people) do not have any retirement savings to speak of.

Even worse, 86 percent of future retirees cannot correctly identify the factors that determine their Social Security benefit amount.

Don’t guess

Almost one-fourth of future retirees who expect to receive Social Security either guess or don’t know how much their benefit will be. As a result, even more retirees – three out of 10 – say their Social Security benefit ends up being less than they expected.

Those approaching retirement say they expect to get $1,610 in monthly Social Security benefits, while in reality recent retirees report their actual monthly benefit is about $1,378. Those who have been retired longer report receiving just an average of $1,185 per month.

While only 11 percent of current retirees used an online calculator to estimate their benefit, among those approaching retirement, these tools are becoming much more popular. Over four in 10 future retirees (42 percent) used a Social Security calculator to estimate their benefit.

The Nationwide Social Security 360 Analyzer provides a comprehensive look at Social Security filing strategies in the context of an individual’s or family’s circumstances and retirement income needs.

Advisors are key

While the development of Social Security calculators is helping to close the Social Security knowledge gap, leveraging the holistic perspective of an advisor is key. America’s workers need to consider all of their filing options to help understand how Social Security can fit into their overall retirement income plan.

Almost one-fourth of future retirees who expect to receive Social Security either guess or don’t know how much their benefit will be.

Retirees who work with an advisor are much less likely than those who don’t to say health problems keep them from living the retirement they expected (25 percent vs. 41 percent), They’re also are much less likely to say health care costs keep them from living the retirement they expected (11 percent vs. 29 percent).

However, too few Americans are working with a financial advisor to prepare for retirement. In fact, just 11 percent of boomers we surveyed have talked to an advisor about Social Security.

Fortunately, those nearing retirement are more likely to have the Social Security discussion. About one-third of future retirees work with a financial advisor – but only half of these say their advisor provided advice on Social Security.

It’s not that they don’t want advice. In fact, 76 percent of future retirees who work with a financial advisor – or plan to – say they are likely to switch to one that could show them how to maximize their Social Security benefits.

Helping advisors help you

For many Americans, there is a retirement crisis looming and advisors are on the front line in our effort to change that. Having meaningful conversations with their clients about their Social Security benefits is an important step. IN short, advisors need to help their clients make one of the most important financial decisions they will make in their lifetimes.

A recent survey of more than 250 financial advisers with clients who have at least $250,000 of investable assets found that many advisers were not comfortable offering advice on Social Security. More than 60 percent of them said they wanted more information, and 54 percent said they would like more tools and products.

So, what is your message to your clients? That life events don’t mean you have to claim early. While sometimes it makes sense to file early, advisors can recommend strategies to their clients that draw down from their portfolio and allow for Social Security to grow and then take it later.

Those who are willing or able to wait get rewarded. According to the Social Security Administration, American workers receive an extra 8 percent per year for every year they postpone collecting benefits beyond their full retirement age amount – up to age 70. ◊




Find out more about making the most of your Social Security benefits at Advisors can visit
1 Nationwide Retirement Institute Health Care Costs assessment tool and Social Security 360 analyzer case study, 2016
The Nationwide Retirement Institute educates advisors across the country and at industry conferences and our Social Security breakout sessions are often standing room only. More than ever, advisors are attending our webinars and using our online tools and resources to learn how to have these discussions with their clients.
Advisors can also use our Social Security 360 Analyzer, along with our Health Care Costs Assessment tool, to provide a fact-based estimate on how much of their client’s Social Security benefit will go towards health care costs and build a plan from there.
This information is general in nature and is not intended to be tax, legal, accounting or other professional advice. The information provided is based on current laws, which are subject to change at any time, and has not been endorsed by any government agency.
Nationwide Investment Services Corporation (NISC), member FINRA. The Nationwide Retirement Institute is a division of NISC.