RETIREMENT
Security benefit because she ’ d been married at least 10 years and never remarried , Minor says , explaining that individuals get the higher of their own benefit or 50 % of their current or former spouse ’ s benefit . With the Government Pension Offset no longer in effect , this client ’ s monthly spousal Social Security benefit is $ 2,000 , Minor estimates . “ The $ 1,500 per month difference allows her to have a complete retirement if she chooses ,” he says .
Widowed individuals are allowed to take the larger of their own Social Security benefit or a survivor benefit . Jeremy Finger , the founder and CEO of Riverbend Wealth Management in Myrtle Beach , S . C ., advises a widow who lives on a noncovered pension earned as a teacher and Social Security from jobs she held after her teaching career . Finger says that under the new law , the best strategy for this client is to continue to receive her own Social Security benefit , which will increase because the Windfall Elimination Provision has been repealed ; then at her full retirement age in a few years she will switch to the survivor benefit , when it reaches its maximum , 100 % of her late husband ’ s benefit . ( Before a survivor ’ s full retirement age , the survivor benefit is less than the deceased spouse ’ s or ex-spouse ’ s benefit and this was further reduced under the old rules by the Government Pension Offset .)
To make sure the Social Security Administration doesn ’ t switch her to the survivor benefit now , “ She needed to be very clear with them that she wanted to continue to take her own benefit and defer the survivor benefit ,” Finger says .
How To Help
“ A lot of people have no idea they can get Social Security from a prior spouse ’ s work record , and the Social Security Administration doesn ’ t automatically review prior marriages to determine eligibility ,” says Devin Carroll , owner and lead advisor of Carroll Advisory Group in Texarkana , Texas . Moreover , many pensioners have never applied for a spousal or survivor benefit
“ We , as advisors , have an opportunity and responsibility to keep our clients from leaving unclaimed benefits on the table .”
— Devin Carroll
because they knew the Government Pension Offset would completely eliminate it .
What these folks may not know is their benefit could be higher now . “ We , as advisors , have an opportunity and responsibility to keep our clients from leaving unclaimed benefits on the table ,” Carroll says .
Clients can file online for spousal benefits as well as their own individual benefits . They can file for survivor benefits only by phone ( at 1-800-772-1213 ) or at a Social Security office . When calling , Carroll says , “ It ’ s very important that the client tells the representative on the phone , ‘ I want to make sure that we set today as my protective filing date .’ That starts the clock ” for the benefit .
Potential Tax Bite
Keep in mind , however , that there are tax implications here , and Hickey urges advisors to first understand what a heftier Social Security income could mean before revamping a client ’ s plan . An increase in income could put the client in a higher tax bracket or raise their Medicare premiums under the income related monthly adjustment amount ( or “ IRMAA .”)
It ’ s also possible that the client ’ s required minimum distributions from their retirement accounts will be larger than previously projected . Retirees with pensions are often less reliant on withdrawals from their retirement accounts for income . As a result , their account balances may remain higher for longer , leading to larger RMDs once they are required to start taking them . Hickey tells advisors to communicate with the clients ’ tax professionals about changes in income .
Planning Perspectives
When a client has the guaranteed income from a pension , they enjoy some planning advantages , Hickey says — for instance , they ’ ll need less in emergency reserves . “ We can say , ‘ You only need X per month on top of what you have coming in ,’ and we base the emergency fund off of that ,” he says .
Psychologically , the secure income stream shields clients from anxiety about market volatility . Minor says , “ In 2022 when the market was falling , very few of my clients with pensions seemed concerned or contacted me proactively .”
But it ’ s not all roses . Many public-sector pensions have either a small cost-ofliving adjustment or none at all . Advisors ’ retirement income strategy for the client has to take that into account , Minor says .
Moreover , people with pensions often have less in retirement savings , “ at least in the beginning ,” says Minor . “ But they ’ re more likely to have considerably more assets in the future [ than individuals without pensions ] because they don ’ t need to draw down their savings as much .”
48 | FINANCIAL ADVISOR MAGAZINE | MARCH 2025 WWW . FA-MAG . COM