Social Integration
By Carolyn Ellis
Ms. Ellis is Features Editor for LIFE&Health Advisor. Connect with her by e-mail: cellis@lifehealth.comThe Nationwide Research Institute’s 2014 Social Security Study revealed that women who did not have a financial advisor were far more likely not to optimize their Social Security retirement benefits. As Director of Long Term Care Initiatives, Shawn Britt is a thought leader in the Advanced Consulting group at Nationwide Insurance. Her involvement extends to any of Nationwide’s directives that involve women specifically and women in investing, including projects like the Social Security Study. When and how to file for Social Security are important financial decisions. We talked with Britt about how advisors can use study findings to better guide their clients.
L&HA: Nationwide’s 2014 Social Security Study explored how Americans avail themselves of Social Security retirement benefits. How does this study fit in the context of research by the Nationwide Retirement Institute?
SB: Our goal is to create awareness in the field of opportunities that clients are missing. It’s part of our thought leadership program. With our Social Security 360 calculator we help advisors maximize their clients’ Social Security return as a part of a complete solution. We also have tools for healthcare cost, retirement income planning, and long term care.
L&HA: What are key findings of the Social Security Study?
SB: Over 80 percent of women are taking Social Security early. Some need the income; perhaps they have to care for a parent now. They may have a pension but because they had to retire early to care for the parent, the pension isn’t what it would have been. Other women think, “I’m 62 and I’m entitled to my benefits.” They don’t realize what they’re losing because they don’t have an advisor who can tell them what the big picture loss over 30 future years could be. Then there are women with serious health conditions and limited longevity who probably should take Social Security early because waiting is not going to pay off.
L&HA: So, in a way, Social Security income can be considered another important income-producing asset?
SB: People are not aware of how many different ways there are to collect Social Security. With today’s technology, we’ve created an assessment program that can plug in an individual’s situation – factors like health status, family longevity, marital status, pensions — and then show the client in dollars how different scenarios will play out. It’s no longer just rolling the dice.
L&HA: Were you surprised by any of the survey results?
SB: Not really. I talked with an advisor whose client had gone on Social Security but should have delayed. When he asked why, the client said, “I went to the Social Security office to find out what the program was going to offer. The representative said I should take it, so I did.”
L&HA: Is it true that only 2% of women delay taking their Social Security benefits?
SB: Our survey found 3% of women waited to optimize Social Security; over 80% took it early. Only 15% waited until full retirement age. When women are single or widowed, that can have an impact. According to the Social Security Administration, about half of married people and three-fourths of single retirees depend on Social Security for at least half their income. We also know that by age 75, about 74% of men still have a spouse whereas only 38% of women do. For married women, an option to consider is to have the husband file and suspend, taking benefits at age 70. As a widow, the wife would then receive higher payments. Many people don’t realize that with double-income families, especially if both people have similar income, it can be a huge reduction when one spouse, husband or wife, passes away.
L&HA: Caregiving, whether for children, elderly parents, a spouse, or grandchildren, has a significant impact on women’s income throughout their lives.
SB: Having children and being a caregiver can cost women $565,000 of lifetime earnings; plus $25,400 of Social Security benefits and $67,000 in pension benefits. It’s a snowball effect. You have years of zero income to show on your Social Security statement that then impacts 20-30 years of Social Security retirement benefits.
L&HA: How expert does an advisor need to be about Social Security benefits?
SB: Each of our retirement planning tools helps advisors create a more complete retirement picture for clients and each works a little differently. Our Social Security 360 calculator can be downloaded to your desktop. For our long term care tool, advisors complete a questionnaire and email or fax it to our Income Planning Desk. Within 48 hours the Income Planning team will generate a report on your healthcare or your long term care cost shortfall. A financial advisor might say hold off on taking Social Security, and in the meantime we’ll put a chunk of money into a single premium immediate annuity and generate an equal income stream while the rest of your assets grow. In the big picture, you’re going to collect a lot more money.
L&HA: Is this a call to financial professionals to incorporate Social Security into their planning?
SB: Absolutely. Financial advisors are supposed to help you grow your assets so that you can live better in retirement. Another part of planning is how you can maximize money that your client is entitled to from the government. There are more than 2,000 rules in the tax code related to Social Security. With our Social Security 360 calculator and its customized report the advisor can have a conversation, and this is our goal. Social Security has a payback period but it’s much shorter than it used to be. If you begin payments and decide you’ve made a bad decision, you now have 9-12 months to pay the money back. Often people don’t realize they made a bad decision for a couple of years.
L&HA: There’s been much press recently about using a so-called robo-advisor for investing versus a living, breathing human being. Would you care to comment?
SB: There’s a big trend towards people who just want to get on the Internet, do their own quote, and buy online. If you need some term insurance to cover an alimony payment for ten years that might be fine, but in the big picture you need to talk to a human being who can analyze your whole financial picture. Our Social Security 360 calculator helps advisors help consumers create the best financial plan. ♦
