The latest version, Social Security Analyzer 2.0, which I recently tested, does an excellent job of optimizing Social Security benefits with a minimal number of inputs. All you need are the names of the clients, their status (single, married, widowed, divorced) their birthdates, their anticipated life expectancy and their primary insurance amount (PIA). This is the amount that clients can expect to receive if they retire at full retirement age. Clients should receive this estimate annually on their Social Security statement. They can also obtain it online from the Social Security Administration. In the case of a divorced person who was married for at least 10 years and did not remarry, the former spouse's PIA, as well as the date of divorce, is also necessary to analyze all options.
Once the data is entered, you push the "get results" button. The application runs a number of calculations based on the information provided. The first result is the summary page. It contains the recommended strategy, which is computed to provide the maximum benefit for the life expectancy or life expectancies provided. It clearly displays the total projected benefit over the full period and the maximum monthly benefit. In addition, it displays the cumulative benefits at five-year intervals over the life of the plan. A graph displays the recommended plan and contrasts it with two other pre-programmed scenarios: a short life expectancy and a long life expectancy scenario. This gives the advisor and the client immediate feedback on what the impact would be, under the recommended plan, should the life expectancy assumptions be off target.
The final portion of the summary page describes the recommended strategy. For a single person, it might be as simple as selecting an appropriate starting date. For a couple, the plan could be more complicated. For example, in one scenario I ran, the recommendation was for the husband to file a restricted application for spousal benefits at age 67, and for the wife, age 66, to begin benefits based on his earnings at that time. At age 70, the husband begins taking benefits based on his earnings. When the wife reaches age 70, she switches to benefits based on her earnings record; when the husband dies, she switches to survivor benefits.
Tabs across the top of the page give you access to additional functionality. The analyze tab provides a detailed description of the recommended plan. You can toggle between the recommended plan and the long or short life expectancy scenarios with the push of a button. A compare tab contrasts the recommended strategy with taking benefits early, at full retirement age or late. The summary page displays the recommended plan and a few others (early, FRA, delayed) under multiple life expectancy scenarios. There is also the ability for users to construct their own strategies and compare them to the ones provided by the program by default. For advanced users, the Advanced tab allows users to change assumptions about discount rates, COLA, life expectancies, tax rates, percent of Social Security taxable and client earnings in the years before retirement (age 62-66).
The reports tab allows users to create both a default and custom templates that output some or all of the factors we've discussed above in PDF format. The report template allows users to input some custom introductory text. It also includes a required disclosure page. The report provides an explanation of why the recommended strategy was selected, in plain English, and it discusses under what circumstances the recommended strategy might not be the best one. There's even a break-even analysis comparing two strategies, for example taking benefits early versus following the recommended plan. If you entered a recommended annual income need, the report will specify what percentage of that need will be met by Social Security income. Overall, I judged the report to be very well done.
A Significant Application
I believe that the Social Security Analyzer could be a significant application for a number of reasons. First of all, for the more sophisticated planner, this application can create and compare multiple, often complex Social Security scenarios, and display them to the client in an easily digestible format. The fact that it clearly displays the potential increase in benefits over time clearly quantifies for the clients the value of the work you are doing on their behalf. You may be able to arrive at the same result using financial planning software or a spreadsheet, but you probably will not be able to do so as quickly, as easily, or with client reports of comparable quality.
Perhaps more significantly, software of this nature opens up new business opportunities for those who serve the middle market or those who aspire to do so. Baby boomers with limited savings may not be ideal clients for advisors who charge for managing assets only, but if you have potential clients that can increase their Social Security payouts by hundreds or thousands of dollars per year with your help, you can perform a real service while earning a well-deserved fee for your efforts. In any event, offering a Social Security maximization service could attract a lot of positive PR and a significant number of prospects for your firm.
The pricing is attractive. Introductory pricing allows advisors to lock in an annual rate of $750. After the promotional rate expires, the annual fee will be $1,200.
If there is one aspect of the offering that may discourage use, it is the fact that Social Security Solutions also markets a product directly to the public; in fact, they offer three different plans direct to the public. The first is a single printed "deluxe report" for $19.95. For $49.95, consumers can run unlimited comparisons on their own. For $124.95, the Premier Plus offers what appears to be a competing solution including live expert advice, the ability to ask detailed questions and dedicated customer support. Most advisors I know are not inclined to do business with firms that they feel compete directly with them for the same business, so I suspect that Social Security Solutions may have to choose between working with advisors or directly with the public. I suspect they will have a difficult time succeeding in both channels simultaneously.
Aside from the competitive aspect, Social Security Analyzer has a lot going for it, but the competitive aspect matters. An advisor who might be inclined to offer a Social Security maximization service for the middle market will be much less likely to do so if the provider of his software appears to be competing directly against him. It will be interesting to see how this plays out in the marketplace.