As annuity professionals, our conversations with clients often include income planning. Perhaps nothing will change your clients' retirement income situation more than the time they elect to receive Social Security
income. Claiming benefits later could mean a 75 percent higher monthly benefit for your clients.
Today, everyone from advisors to FMOs and direct marketing companies are using Social Security as a conversation starter to segue into a broader income and annuity conversation. Despite your current understanding of Social Security benefits, here are 12 basic facts about Social Security that will help you be better prepared to have “the talk” with your clients.
1. The monthly benefit you earn as a worker is generally based on the average of the highest 35 years of earnings on which you’ve paid Social Security payroll tax and the age your payments began.
2. You can claim Social Security at any age between 62 and 70.
3. If both husband and wife have claimed benefits, each is guaranteed half of what the other would get at full retirement age.
or widowers can choose to receive their own benefit or a survivor benefit equal to their spouse’s monthly benefit.
5. Because most women outlive men by an average of seven years, a husband can get their surviving spouse more than 20 percent if they claim at 66 instead of 62, and 60 percent more if he claims at 70.
6. If you elect to take benefits but continue working, a portion of your benefits are withheld based on your amount earned. Once you fully retire, these withheld benefits are paid back in the form of slightly higher ongoing payments.
7. Monthly benefits are calculated so that lifetime benefits are much the same no matter when the average person collects.
8. Only 1 out of 7 couples lose 15 percent of benefits if the higher earner elects benefits at age 66.
9. The highest risk of “losing big” exists for those who claim early.
10. It is estimated that once the Social Security trust fund is depleted in 2037, Social Security will only be able to pay out $0.78 on the dollar.
11. The three most prominent proposals to cut benefits are:
- Raise the full retirement age
- Freeze the purchasing power of monthly benefits at current levels
- Cut the benefits of high earners.
Nearly every “fix” proposal protects benefits for those currently age 55 and older.
12. The three most popular ways to supplement Social Security retirement income
- Pensions and annuities,
- 401(k)s and other retirement savings, and