Help Your Clients Avoid These Costly Social Security Mistakes

As with most people, Social Security will probably represent a big part of a majority of your clients’ retirement income. Their benefits will be adjusted annually for inflation and, of course, last until death. To assist your clients and help them get the most out of Social Security, as their financial advisor, you have a responsibility to help them wade through the extra steps required—more than just filing for benefits. The rules can be complicated, and crucial errors can cost your clients thousands of dollars.
One common mistake that financial advisors can help their clients avoid is using the wrong retirement age when they decide to file for benefits. The majority of advisor’s clients will be under the assumption that they’ll be eligible for full benefits at 65, but this isn’t always the case. Were your clients born in between 1943 and 1954? Their full retirement age is 66. For those born in 1955 and afterward, full retirement age is going to rise gradually in two-month increments to age 67 for people born in 1960 or after.
This is important because once clients reach full retirement age, advisors should assist them in claiming their full Social Security benefits. If your clients claim any earlier, their total benefits will be reduced. It’s also important to note that once clients hit full retirement age, they can earn about as much as they want without forfeiting any Social Security benefits.
Another huge mistake that is entirely too common is when clients ignore how filing for benefits affect their spouses. There’s some things married couples can do to increase combined benefits. For these strategies to be advantageous, timing is of the essence. For example, if the higher-earning spouse delays filing a claim until age 70, the other spouse could claim a spousal benefit—providing some income in the meantime.
It’s also important to advise clients that may have retired too early and now are regretting it that they shouldn’t overlook the possibility of a ‘do-over.’ Clients can withdraw their application for benefits within 12 months of the date they filed; they can pay back benefits and restart at a higher rate later. If they’ve passed the 12-month mark, they still have options—once clients reach full retirement age, they can voluntarily suspend benefits. They’ll earn delayed retirement credits until they start claiming benefits once again.
This is just the beginning to improving your client’s retirement by incorporating all the steps needed to maximize benefits.