Social Security Mistakes: Leaving $250,000 On The Table

rube goldberg

Social Security rules are convoluted, but guiding clients to a better claiming strategy could increase their lifetime income by 25% or more

Are you within ten years of retirement? What if we told you there’s an easy way to put an extra $100,000 to $250,000 in your pocket in retirement….all free for the taking?

All it takes is a little bit of knowledge. Unfortunately, that knowledge pertains to a very complex, Rube Goldberg-like system called “Social Security” that hardly anyone understands.

The knowledge gap

“There is a huge gap between what most Americans think they know about Social Security and the actual rules governing the nation’s primary retirement program,” explains personal finance writer Mary Beth Franklin, citing a new survey recently released by Financial Engines.

“As a result of this knowledge gap,” says Franklin, “the typical retiree leaves as much as $100,000 in lifetime benefits on the table. For a married couple, the difference between a smart claiming strategy and the urge to grab the money as soon as possible could be $250,000 or more over their joint lifetimes.”

Mapping an optimal Social Security strategy

In our practice, when we meet with pre-retirees, one of the first things we do is map out optimal Social Security claiming strategies. That means how and when they’ll claim their Social Security benefits, with a view toward maximizing what they get over their life expectancy.

To crunch all kinds of possible scenarios and permutations, we do use some special software that makes it pretty quick and painless.

There is no one “right” answer. For some clients, the best approach is to claim benefits as soon as possible. But for others, the optimal strategy is to delay taking benefits and use some of the more complex claiming strategies.

Making a dramatic impact

Understanding Social Security, and making the best decisions when claiming benefits, is more important than many people realize.

“There are few financial planning decisions that can have such a dramatic impact on the standard of living in retirement,” says Christopher Jones of Financial Engines, when interviewed by Franklin, who is herself an expert on Social Security strategies.

We met recently with longtime clients who plan to retire in about one year. We discussed setting up an income stream for them in retirement, and showed how pension benefits, Social Security, and portfolio withdrawals will all coordinate to make their money last as long as possible.

After our meeting, the husband took us aside and thanked us for bringing some of the Social Security maximization techniques to his attention. He said he was stunned to see how much could be gained by mapping out a claiming strategy, and even mentioned our conversations to some other pre-retirement buddies at work to see if they knew how much could be at stake.

Who ever knew that Social Security would become a hot topic around the water cooler? But with $250,000 at stake, the topic sure does seem to take on a new urgency.

Putting together the building blocks of retirement

When it’s time for you to make the important pre-retirement decisions, you might want to call on your Certified Financial Planner™ for help.

“Financial advisers are best suited to help people understand how to put the building blocks of a retirement plan together, such as Social Security, retirement savings and, for some people, continued employment,” says Financial Engines’ Christopher Jones, adding that the government just doesn’t have the resources to educate everyone about the intricacies of Social Security.

Helping clients navigate retirement is one of the things your CFP® advisor does best. And as Franklin and Jones explain in the article, “guiding clients to a better Social Security claiming strategy could increase their lifetime income by 25% or more.”


About Mari Adam

Mari Adam, Certified Financial Planner™ has been helping individuals and families chart their financial futures for over twenty-five years. Have a question about your financial situation? Ask Mari!

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