Clients who may have worked for only 30 or 32 years often ask what would happen if they work another year of two, Johnson continued, and in that scenario an advisor really has to run the numbers. “If the client has some zeroes, they could kick out some of those lower years and impact their benefit. But you’re dealing with 35 numbers, so if you kick out a zero for a really high earning year, it’ll make a difference. But if the client is making about their average, it won’t.”
As for choosing the timing of the benefit, “this is just as much an art as it is a science,” Johnson said. “It’s not an exact conversation. Taking social security early is a 30% penalty on the benefit. I consider that to be fairly significant, so it’s worth the conversation.”
Gaming the system, so to speak, really only occurs when the client is expected to live well beyond 83 (which is the gender-neutral expectation) or expire much earlier. “If we live to about age 83, it makes little difference when we took our social security,” she said. “But if you have clients with a lesser-than-average life expectancy, it’s meaningful to collect a little bit early, and that could make a lot of sense for these individuals. On the other side, if longevity runs in the family, those clients will put more money in their pockets from social security over time. And women live longer, so it makes sense to choose later for that extra income to make life more comfortable.”