Social Security retirement benefits are the backbone of retirement income for most American workers. In fact, in 2023, an average of nearly 67 million Americans per month will receive Social Security retirement benefits.1 For many, it is their only source of guaranteed income. However, it was never intended to be the sole support for retirees—only part of the retirement-income puzzle personal savings. Additionally, it was intentionally designed to replace less income for higher-income individuals, who make up the bulk of financial-planning clients.
Complicating the issue, headlines today are awash with news that the Social Security Administration is running out of money. The truth is a little more nuanced than that. Social Security is a “pay as you go” program funded with ongoing employee and employer payroll taxes. The prediction is that changes in population will result in insufficient funding to pay full benefits by some time in the 2030s. If that happens, the Administration may not be able to pay out all the promised benefits. Whether that happens or not is a bigger topic than we can cover here today, but the looming concern reinforces the importance of planning for additional retirement income in the future. For clients who are unable to set aside their concerns, it’s important to stress that planning options are available.
Clients looking to maximize their retirement incomes must consider all their options before making decisions that could affect the rest of their lives. Be prepared to advise them in the following areas:
A great first step toward making effective claiming decisions is to consider the options well in advance. Encouraging clients to set up their My Social Security account and review it regularly may help them correct mistakes, understand their expected benefits, adapt plans around the duration they will work, and save more to augment retirement income.
By reviewing the various scenarios, financial professionals can help clients make informed choices and design an appropriate claiming strategy. It’s vital to communicate the trade-offs associated with every strategy, as that knowledge can help reduce some of the stress clients may feel about their decisions.
1Social Security Administration. (2023). Fact Sheet: Social Security. Last assessed 04/24/2023.
2Social Security Administration. (2023). How Delayed Retirement Affects Your Social Security Benefits. Last assessed 04/24/2023
3Social Security Administration. (2023). Suspending Your Retirement Benefit Payments. Last assessed 04/24/2023
For more information about retirement-planning, please contact our Retirement Strategies Group at RSG@PacificLife.com or (800) 722-2333, ext. 3939. PacificLife.com
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Pacific Life refers to Pacific Life Insurance Company and its affiliates, including Pacific Life & Annuity Company. Insurance products are issued by Pacific Life Insurance Company in all states except New York and in New York by Pacific Life & Annuity Company. Product availability and features may vary by state. Each insurance company is solely responsible for the financial obligations accruing under the products it issues.
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