The Anxieties of Aging

Social Security: The Foundation For Retirement Income

 Five topics to discuss before recommending a strategy

by Marcia Mantell

Ms. Mantell is the founder and president of Mantell Retirement Consulting, Inc., a retirement business development, marketing & communications, and training company supporting the financial services industry and its clients. She is author of “What’s the Deal with®… Retirement Planning for Women” and blogs at

When it comes to planning for sustainable, reliable income throughout a client’s retirement, sometimes less is more. Think smaller withdrawal rates, fewer equities, or downsizing to a smaller home. It’s equally important to assess when more is more. That’s why getting the right Social Security claiming strategy is so important. More Social Security income means more guaranteed income in later years. It also means more options and flexibility for the assets the clients have at their disposal. In short, Social Security is the foundation of a client’s successful retirement income.

But getting clients to make the best decision today for a complicated tomorrow is a tall order. This has been a problem for years. During a Senate Aging Committee meeting in 2016, Senator Claire McCaskill (D-MO) made the comment: “The American public is clueless that this decision is so important,” when talking about the importance of Social Security. “It is staggering that so many Americans don’t realize that this is a decision at all,” she continued.

Your clients do need your help to make the best decisions for their income from Social Security. But often, they have already decided based on their beliefs or because they know the money is there with their name on it. You’ll need to get to the core of clients’ beliefs and understand where they are coming from if you want a chance to influence and guide their decisions.

You may find it helpful to address 5 topics well before any decisions have been made, and before your clients push the “submit” button on to claim the “gold in them thar hills”.

Topic 1: Do you believe Social Security will be there for you?

This is probably the most important question you can ask your clients. For many, they have formed strong, specific, and often ill-informed perspectives and beliefs about the viability of Social Security. This mindset can be a positive force, or one that you may have to strongly influence.

Clients who believe Social Security will be there for them
This group is hungry for confirmation and validation. They want to understand how to maximize income and what the trade-offs might be. They want your expert opinion, value your input around the program, and look to you for resources to further their knowledge. Talk to these clients about using Social Security as a floor or the foundation to their income in retirement and how their decisions gives them more flexibility with their other assets.

Clients who believe Social Security is on the brink of disaster
This group of clients will be highly skeptical or overly concerned that Social Security will not be there for them. They have already set their sights on claiming at 62 no matter what. They want the money. Talking to these clients with perspective and clear points may help them reconsider their staunch mindset. Why? Because these clients are:

  • Getting a 25% – 30% pay cut. When clients claim early, they lock in a permanent reduction in monthly income for their entire retirement. That puts a tremendous crack in the foundation of their income strategy. The net effect is drawing down more of their own money at a faster rate.
  • Locking in the least amount of survivor income. For those married couples, if the higher earner dies first, he or she subjects the surviving spouse to the least amount of income from Social Security.
  • Not getting paid every month. Discuss the implications of the earnings test. Assuming clients will continue to work, they can only earn about $1,400 per month in order to receive a monthly check. Otherwise, their benefit is clawed back and they can miss out on months of benefit checks. Social Security income is meant for those who are retired; not for those who want to grab-and-go early and while still earning a high salary, too.
  • Paying more in taxes. For high earners, up to 85% of their Social Security income will be subject to tax. Have them use the worksheet in IRS Publication 915 to see the tax impact.

Topic 2: Can you tell me how Social Security calculates your benefit?

This topic is a showstopper for most clients. They have no idea how their benefit is calculated. In fact, they don’t understand that Social Security is a type of insurance benefit. Discussing at a high level how their decisions impact the size of their benefit can help clients make better decisions.

  • It’s About Your Work History
    First, Social Security calculates benefits based on each worker’s own work history; how much each person earned every year since they first started working. One’s actual earnings (up to the annual taxable wage base) are first indexed by a wage inflation factor, then the highest 35 years of earnings are identified. If a client has 42 years of work and earnings on his record, only the top 35 years will be used in the calculation. If a client has 25 years of work and earnings, those 25 years will be in the calculation along with 10 zeroes to total 35 years.
  • Know Your Full Retirement Age
    Second, Social Security calculates one’s benefits at their Full Retirement Age (FRA). This is the “anchor” to the benefit. If clients set up their claim to start paying the month of their FRA, they will receive their full, unreduced benefit. If they claim early, they lock in a permanent reduction. If they claim after FRA, they’ll get a “bonus” amount. More is more.
  • It’s a Calculated Benefit
    Last, the benefit is a relatively simple calculation. The highest 35 years of indexed earnings are averaged, called the AIME, or Average Indexed Monthly Earnings. The AIME is split into three “brackets” and only a portion of it comes back to a client in the form of a benefit.

If a client doesn’t have some understanding of these levers and the implications of them directly on his or her monthly income in retirement, it’s easy to make less than optimal decisions.

Topic 3: What are you planning to do in your 80s?

When we talk about Social Security and protection of the lower-earning spouse, we tend to focus on the amount of income that will remain in the household. Not a bad idea, especially since married households stand to lose one-third to fully one-half of Social Security income when the first spouse dies

By the time many clients reach age 60, they may be tired, worn out, stressed on the job, and genuinely looking forward to retirement. If they can only make it two more years…they tell themselves.

Recognizing that this may be a situation for many clients, it’s easy to see why they may want to give their notice, get on to more fun things, and replace some of their lost paycheck with an early claim to Social Security. The problem is that they are unknowingly focused only on the here-and-now. It’s more important for them to focus on the horizon, when they are age 80 or 90 or 100. What will their life be like that far into the future?

  • If they are willing to take a 30% pay cut at age 62, would they be willing to do so at 80?
  • Where will their income be coming from twenty years from now and will it be enough?
  • What options will they really have at age 80? Whose hiring octogenarians?

Some clients will have options: they plan to downsize their home or have an annuity to tap at 85. In those cases, maybe leaving the job is the best idea at 62. But they still do not have to claim Social Security. Suggest that they take a 6-month sabbatical or phase out by working part-time until maybe 65. Finding a new job might relieve some stress and put them in a better financial position.

Keeping a bright and clear eye on the decades ahead is an important component to creating the best income strategy possible for each client.

Topic 4: How much money do you want to leave to children, grandchildren, others?

Clients are quite fascinating when thinking about their money. For many, it is important to make sure they leave something for their loved ones or to a charity. And, they want to leave more rather than less. Many will ask where their Social Security payments go if they die early, thinking they can name a beneficiary. That is not so. Social Security payments stop when you die.

Reckoning the reality with the wish list is not so easy. When clients want to leave a large financial legacy, their living money needs to come from somewhere. In these cases, it may be better to wait as long as possible before leaving the job or taking a part-time position so as to have a strategy to wait until age 70 before claiming Social Security.
There are several considerations to put on the table here, including:

  • How reasonable it is that a client can work in his or her current capacity until 70?
  • Is the spouse only eligible for a spousal benefit? Is it optimal for her or him to wait for the worker to claim at 70?
  • How is each spouse’s health outlook and their likelihood to live until life expectancy and beyond?

Further, there may be gifting strategies that could be more beneficial to the younger generations rather than trying to leave a large legacy.

Topic 5: If the primary bread winner dies first, how involved does the spouse want to be in financial affairs?

When we talk about Social Security and protection of the lower-earning spouse, we tend to focus on the amount of income that will remain in the household. Not a bad idea, especially since married households stand to lose one-third to fully one-half of Social Security income when the first spouse dies.

But, the larger matter is discussing how each person will want or be able to handle the finances as the survivor. Not only will there be a significant loss of income, but the survivor now has to become more involved with the finances and make good decisions to support herself or himself at a time of grief, confusion, and possibly cognitively impaired. It’s important to play out both scenarios with the spouses: if he dies first, how much financial responsibility does she want to take on? If she dies first, how much is he prepared to take on?

Of course, you will be there to guide the surviving client through the maze of death and estate closure, but if the non-financial spouse becomes the survivor, the odds of him or her making good decisions can be low. This is an important discussion between the spouses that every advisor should address and moderate when creating a retirement income plan that works… even though it may be quite difficult.

…and One Last Thing

A shocking number of Americans claim Social Security before their FRA, and a pitiful few wait all the way till 70. There have been improvements in claiming over the last 20 years, but still way too many folks claim at age 62. Here is the most current data from the SSA for 2016 new claimants (last data available):

Claim at 62

Claim before FRA (including those claiming at 62)

Claim at 70










An Industry of Numbers

We are an industry of numbers. In the case of retirement income, it’s generally better for clients to have more money than less. But, leading with more numbers and more analysis may not be the best approach for clients. You may find you have better success when you talk about Social Security as the underpinning to their retirement income strategy. Find out how they think about this somewhat maligned program. Challenge them to think about broader goals, family, and legacy first, then back into better financial options based on how Social Security really works.

It’s not always easy to get clients on the best path for them. Making the wrong turn at 62 can truly cost clients the confidence and income they will need through future decades. ◊

There are many tools and resources available to advisors. Here are a few I think you’ll find quite helpful:

  • Website:
  • Social Security tool and training for Advisors: Covisum
  • Book: Andy Landis’ Social Security: The Inside Story