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 a 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 emailed news articles are likely to do the trick.
Maximizing retirement income is complicated. In my experience, those “ah-ha” 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-sixties? You’re then able to launch into a conversation about financial planning, or interim products like annuities. 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, on the The Next Chapter Advisory Council and executive vice president of LifeYield. Learn more at www.LifeYield.com.
Social Security Going Broke? Here’s The Smart Client Conversation
September 2, 2020
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For financial planning purposes, I tell my clients to consider Social Security a retirement given. The chattering classes are always doomsaying SS, but they fail to understand the basis for its permanence. SS will never make you rich, but it will always be there. The reason is that SS is a bedrock contract with the American people. The damage done to it by LBJ in gutting the Trust Fund and replacing it with nearly worthless IOUs, followed on by the addition of multitudes of non-paying claimants, have weakened SS greatly. However, regardless of the foibles of the politicos, FDR made a contract with the American people, and that contract will only be abrogated at the peril of those politicos. If the politicos would try to sharply decrease its benefits, they would see a tremendous negative reaction very quickly. Those people who would be most affected, would in effect have nothing to lose. They are a well armed, intelligent and articulate lot, and the riots they would cause would make the Portland riots look like the Peanut Gallery of the Howdy Doody show by comparison. Unlike the anarchist riots, these would be focused not on the poor sections of town, but on where these politicos live and work. They would not be after 75" TV sets, but literally the scalps of the politico malefactors. It would not be pretty, but it would be pretty effective. "The tree of liberty must be refreshed from time to time with the blood of patriots and tyrants." Thomas Jefferson A real patriot who sees his most sacred contract with his government being abrogated has a lot more motivation, incentive and desire to restore that contract than does the rioter out to score a 75" TV set. You harm old people, watch out. They went to school when American History was faithfully taught. And they have long memories.