Of course, advisors can rely on their judgment to recommend asset location and allocation, the best time to file for Social Security, how to sequence withdrawals and coordinate all the above. But that would be hubris. Coordinating the various assets, accounts, and income sources is too complex (read my perspective) to leave this delicate unwinding of assets to assumptions and hope. And trying to anticipate tax law changes is a loser’s game.
Tip #3—Coordinate And Defer Social Security Benefits
Few advisory clients rely on Social Security for their total retirement income, but most consider it a foundation they built by paying taxes for 40 years or more.
Remember: Clients can earn 8% per year between their “full retirement age” and age 70. Many Social Security tools can analyze different filing strategies for household members and suggest an income strategy that minimizes taxes and maximizes Social Security benefits.
With some software, advisors can show clients how to fill any income gaps while adopting the filing strategy to provide them with the maximum possible Social Security benefit. Some clients may choose to convert some assets into an income annuity. As Simonoff and Pfau wisely note, many clients crave security.
Maximizing retirement income is complex—and rewarding. It’s the holy grail of financial advice. Do you think investors who learn from someone else they can enjoy 33% more retirement income might look for a new home for their assets?
Paul Samuelson is chief investment officer and co-founder of LifeYield.