How many times have you heard your clients mutter darkly about Social Security “going away”?
Investor concerns about maximizing retirement income are healthy. They’re the biggest reason prospects seek the help of advisors. People worry, with justification, that Social Security benefits alone will not sustain a retirement with dignity, let alone cover ballooning medical costs. But to hear people talk, Social Security is something that was nice while it lasted.
You can (and should!) counter this pessimism. Even if Congress spends the next 14 years in utter deadlock, Social Security will still be able to pay 79% of its promised benefits through 2090, according to the AARP. But it’s hard for most people to shake the idea that Social Security is about to evaporate. It doesn’t help matters to see headlines screaming that the president’s proposed payroll tax cuts would empty the Social Security coffers by 2023 … never mind the uphill battle such cuts would face in a split Congress and the frosty reception from some of the largest employers in America.
Advisors face two challenges here. They need to make Social Security’s impact “real,” and they need to address their clients’ fears. No amount of “well actually” verbal debunking or e-mailed news articles are likely to do the trick.
Maximizing retirement income is complicated. In my experience, those “aha” moments only come when we can visualize what retirement will look like. Or to be more specific, how we’ll pay for our retirement. Software solutions make quick work of this task, showing not only the money available, but where it comes from over the course of a post-retirement lifetime. More often than not, clients are surprised to see how much of a role Social Security benefits will play in their sunset years.
Once your software makes retirement and Social Security tangible in a client’s mind, they ask the most important question: “What now?” Could they get more money by delaying Social Security benefits? We’ve seen that an optimized retirement strategy wins households an average of $150,000 in potential added lifetime benefits. No matter how wealthy you are, an extra six figures of retirement money can make a real difference.
What if they don’t have enough money? Or what if an optimal Social Security strategy leaves them in an income lurch in their mid-60s? You’re then able to launch into a conversation about financial planning. Talk about interim products like annuities, for example. Your software can show how a client’s choices can fill the troughs of income shortfall, or highlight the impact of their planning trade-offs.
The ability to visualize retirement income sources is crucial for the future of advice, because none of your clients’ assets float in a vacuum. Changes to one will affect another, and the proper coordination of these assets can reap benefits like greater tax efficiency. Perhaps most importantly, you can use visualization tools to directly challenge a client’s fears. Are they stone-cold certain Social Security will be gone by the time they retire? Then game it out. Show them what their retirement looks like without Social Security benefits. Now, instead of shutting down your client’s concerns, you can have a real, planning-based conversation about how to plan for the worst-case scenario.
The volatility of 2020 awakened investors to the value of financial planning, and more importantly, smart implementation. I believe more advisors will adopt retirement visualization tools in the future, and not just because the software is more efficient than handmade charts. The real value comes from fostering a conversation with clients. Instead of pushing products or burying them under a blizzard of abstract numbers, you offer a challenge: “Is this what you want your retirement to look like? If not, what levers can we adjust for a better outcome?”
Jack Sharry is co-chair of MMI’s digitally enhanced advice community. He’s also on the The Next Chapter Advisory Council and he is the executive vice president of LifeYield.