individual plan through a state or federal government exchange or be covered as a dependent on a working spouse ’ s plan .

2 . Your clients could wait for Social Security income by turning instead to withdrawals from individual retirement accounts ( IRAs ), 401 ( k ) s , or other tax-advantaged accounts . Many clients probably thought they ’ d wait until the age that required minimum withdrawal ( RMD ) rules say they must begin taking money out . That age was 70½ only a few years ago . But congressional action raised it — first to 72 , then to 73 this year , and to 75 in 2033 .

However , after age 59½ , there is no penalty for tapping an IRA or 401 ( k ). And depending on the balance , clients could use some of their savings to help them delay Social Security .

This is where you prove the value of your advice . By using software that can project Social Security benefits for a client and spouse at different ages and evaluate the tax liabilities of withdrawals , you can look for potential solutions for other income while they wait to file for the benefits .

3 . Your clients could turn to income annuities to provide a guaranteed income stream while they wait . There ’ s been a resurgence of interest in annuities . Companies that issue them have innovated with these products to fit the need of retiring boomers for income stability and volatility hedging in their portfolios .

Annuities are , of course , not guaranteed by the government , and they come with fees . The issuing insurer ’ s financial stability and the effects of fees on portfolio values are factors to consider when discussing annuities with clients .

4 . If widowed or divorced , a client may be able to use a deceased spouse ’ s benefit and wait to claim theirs . A divorced or widowed client has other options . They may be able to file for a survivor ’ s benefit based on a departed or ex-spouse ’ s earnings record and delay filing for their own potentially more significant benefit at 70 .

There are eligibility guidelines , of course , so if this isn ’ t your area of expertise , consult someone who has passed certifying exams in Social Security benefits and who specializes in them .

5 . If the client can ’ t wait until 70 , maybe they can at least delay just a little longer . With Social Security , 62 is when a client can file and receive a reduced benefit . Waiting until the next important age — full retirement age — yields a significant benefit . For those who turn 65 this year , the full retirement age is 66 and 8 months . It tops off at 67 for those born in 1960 or later .

Between the full retirement age and age 70 , clients earn delayed retirement credits monthly that accumulate at an effective annual rate of 8 %.

Between the full retirement age and age 70 , clients earn delayed retirement credits monthly that accumulate at an effective annual rate of 8 %. Ask your client , “ When was the last time you got a pay raise of 8 %?”

A Final Note

You may hear clients express anxiety about the future of Social Security . You ’ re not a soothsayer , but you can remind them that benefits rise with inflation , and they will profit from those cost-of-living adjustments even while on the sidelines .

You can also assure them that changes to Social Security will not affect anybody who is already eligible for benefits — in other words , those who have turned 62 and were born before 1961 .

Finally , wrangling over Social Security funding continues in Washington . President Biden has proposed substantially increasing funding for Social Security . Of course , there ’ s no predicting what will happen , but history and electoral politics provide some comfort .

PAUL R . SAMUELSON is the chief investment officer and co-founder of LifeYield .

ALYSON DOROSKY , CSSCS , is LifeYield ’ s head of Social Security support .

HARD COPY REPRINTS

NON-PRINTABLE PDF SUBSCRIPTIONS

PLAQUES

NEW ADDITIONS !

• Brushed aluminum plaque

• Acrylic stand-off plaque

• Desktop acrylic marquee plaque

Visit reprints . fa-mag . com for more information .

JUNE 2023 | FINANCIAL ADVISOR MAGAZINE | 49