how-to-grow-your-financial-practice-with-social-security-income-planning

Copyright © 2013 by Frank Horath. All rights reserved.
The purpose of this publication is to educate. The author has neither liability nor responsibility to
any person or entity with respect to any loss or damage caused or alleged to be caused, directly
or indirectly, by information contained in this publication.
ISBN: 978-0-615-58221-4
Printed and hosted online in the United States of America.

Acknowledgements
I thank my wife, Mary, who has accepted and supported my frequent absence while both writing
this eBook and curating Social Security income planning practice management and marketing
materials for financial advisors. I duly credit Martha Shedden, my associate, who has been a
stalwart, dedicated partner in researching and refining relevant content for this eBook, in
particular her enthusiasm and keen insight with respect to counseling the female demographic
on Social Security income planning. “Hats off” to Teresa Acosta for her keen editing and content
communication acumen. And foremost, I’d like to thank the hundreds upon hundreds of diligent
financial advisors across this country who are concerned about the well-being of their clients
and who ultimately inspired me to embark upon this most excellent project.

About the Author
Frank Horath is the founder and principal of ClientFirst Financial and
developer of the “Social Security canGROW Your Financial Practice Tool
KitTM
”. Frank has a passion for helping financial advisors better serve their
clients and grow their practice by helping them efficiently and cost-effectively
“bolt-on” the Social Security income planning specialty to their services.
Frank is also a practicing financial advisor and specializes in helping his clients plan and
optimize their retirement income stream. A core element of his specialty is Social Security
income planning and how it can help pre-retirees and retirees maximize and optimize their
Social Security income election for their unique family financial profile.
Frank has presented to numerous professional groups on maximizing/optimizing the Social
Security income election, including accountants/CPAs and estate planning societies. He is a
registered provider with the State of California Bar Association providing continuing MCLE legal
education units to California Attorneys on Social Security income planning. He has also
provided continuing education (CPE) units for Certified Public Accountants.
Frank began his career in the financial services industry as a retail account executive with
Merrill Lynch Pierce, Fenner & Smith in 1994. He then worked as a Financial Advisor for Dean
Witter/Morgan Stanley between 1997 and 2008. Frank made the move to independence in early
2008 affiliating with his current independent broker-dealer. Frank has a Master of Science
degree from the University of California, Santa Cruz and a Bachelor of Science degree from
University of California, Davis in the “tangible sciences” of Earth & Marine Science and Soil &
Water Sciences, respectively.
Frank has been a beta software tester for several of the top Social Security income planning
software developers. He has stewarded numerous financial professionals and clients on
strategies for solving specific Social Security claiming cases. One of his particular passions is to
help enlighten financial professionals to the great consumer need for sound Social Security
income planning. Frank immensely enjoys teaching financial professionals how to market their
Social Security income planning services creatively and effectively.
Frank was briefly famous in October 2005 when he, his son, and two members of a California
winemaking family were stranded for a week in a rare early snowstorm in the Sierra Nevada.

This story has been featured in Time Magazine, CNN, the AOL home page, the Weather
Channel Documentary “Storm Stories,” and in a “How to Survive” article in Popular Mechanics
magazine. He is extremely grateful to the dedicated Fresno County Search & Rescue team for
their relentless rescue attempts and to the U.S. Military for the Chinook helicopter shuttle to
safety.

Table of Contents
Acknowledgements.....................................................................................................................ii
About the Author........................................................................................................................iii
Social Security & Pareto’s 80/20 Rule.......................................................................................vii
Chapter 1: 6 Ways Social Security Planning Can Grow Your Practice ...................................... 1
How early embracers can acquire a bounty of new clients
Chapter 2: The Social Security “Perfect Storm” Demographic................................................... 6
Understanding the strong demand for Social Security expertise
Chapter 3: The Client Conundrum—When To Take Social Security?.......................................15
The decision-making knowledge void advisors can fill
Chapter 4: SOCIAL SECURITY PLANNING 101 .....................................................................21
A distillation of the most relevant 20% concepts
Chapter 5: 6 SOCIAL SECURITY CONCEPTS CLIENTS NEED TO LEARN...........................27
Addressing their key issues to maximize Social Security
Chapter 6: FIVE RELEVANT CLIENT CASE EXAMPLES .......................................................35
Applying concepts and adding value for your clients
Video: Case Study #1 .......................................................................................................37
Video: Case Study #2 ........................................................................................................41
Chapter 7: SOCIAL SECURITY PRACTICE MANAGEMENT ..................................................48
Key resources for adding Social Security planning to your business
Video: Social Security Software demo ..............................................................................53
Chapter 8: SOCIAL SECURITY MARKETING TOOLS ............................................................58
Providing a client-centric suite of marketing content
Chapter 9: IDENTIFYING & REACHING YOUR NATURAL MARKET......................................68
Marketing to centers of influence & the public
Chapter 10: NEXT STEPS & RELEVANT RESOURCES.........................................................75
Critical path resources to develop your practice niche
Additional Resources ................................................................................................................77
Appendices...............................................................................................................................79

Appendix A
CliffsNotes’ Workbook........................................................................................................79
Appendix B
“6 Tools Tax Professionals Ought to Know to Help Their Clients Capture More Social
Security Income” White Paper............................................................................................79
Appendix C
Seminar Evaluation Form...................................................................................................79
Appendix D
White Paper Request Form................................................................................................79

"You have brains in your head. You have feet in your shoes. You can steer yourself any
direction you choose. You're on your own. And you know what you know. And YOU are the
one who'll decide where to go..."
— Dr. Seuss, Oh, the Places You'll Go!
Social Security & Pareto’s 80/20 Rule
This eBook is about distilling key Social Security income planning concepts, practice
management techniques, and marketing tools to help financial advisors grow their practices. I
have taken the liberty of interpreting the Pareto Principle (also known as the 80-20 rule or the
law of the vital few) to Social Security income planning. It is my contention that the most
relevant 20% of the Social Security income planning rules, concepts and techniques can help
you resolve nearly 80% of your client cases (Figure I-a).
By learning the critical 20% and clearly communicating this information to your clients and
strategic alliances, you will gain more market share. This eBook is not meant to be an
exhaustive, all-encompassing guide and explanation of all the different elements of Social
Security income planning. By one estimate, the Social Security POMS (Program Operating
Manual System) prior to going online could have been over 30,000 pages. For all intents and
purposes, you may consider this eBook a CliffsNotes version of the most applicable rules and
technical aspects of Social Security income planning.
Figure I-a: Apply 20% of the relevant Social Security income
planning concepts to resolve 80% of your client cases.
vii ClientFirst.info

We begin by framing the demographic demand and the knowledge/decision making voids that
drive the need for quality Social Security income planning consulting services. Then we provide
five very relevant Social Security income planning case examples that you may encounter in
your practice. We then apply relevant rules and specific claiming techniques to provide
suggested solutions for each of these cases. We take particular care to address the Social
Security income planning needs of the female demographic.
For singles, and couples in particular, it is imperative to apply a best-in-class software solution
to help them make a sound, accurate Social Security income election decision. For couples, the
difference between a sound Social Security income election decision and a poor one can
amount to in excess of hundreds of thousands of dollars in foregone income over their lifetimes.
The Social Security income claiming rules, caveats, and nuances make this a complicated
calculation. Because of these rules and the multitude of potential solution combinations, it will
be necessary to employ quality software to generate best-fit income election claiming decisions
for many of your clients.
Due to the recent economic contraction and overall “flat” stock market over the past decade,
Americans are now taking a much closer look at Social Security income. This dynamic has
provided a captive audience for you to market your Social Security income planning practice. In
the latter part of this eBook, we discuss a multitude of ways to market Social Security to your
clients, strategic alliances, and prospects. And, we introduce an introductory suite of tools to
help you seamlessly bolt-on Social Security income planning to your practice.
There has never been a better time for financial
advisors to reach out and discuss Social Security
with their clients and prospects. Currently, only a
handful of “early embracer” advisors have moved
into the Social Security income planning space. The
major banks and Wall Street brokerage firms have
tended not to pervasively educate their financial
advisory workforce(s) with respect to the Social
Security income planning issue and respective techniques on how to maximize client income.
From a business development perspective, we can view Social Security income planning as a
“Blue Ocean Strategy” for winning greater market share in the financial advisory space. A Blue
viii ClientFirst.info

Ocean Strategy (Chan Kim and Renée Mauborgne of the Blue Ocean Strategy Institute) refers
to the growth an organization can generate by fulfilling―and creating―demand in an
uncontested market space
By absorbing the material in this eBook, you may very well open up an opportunity to
significantly grow your financial practice. Many promising business opportunities result from the
laws of supply and demand. As of this writing, you are fortunate enough to have embraced this
opportunity early in the game. There are now roughly 10,000 baby boomers a day turning
retirement age. These boomers are hungry for your quality Social Security income planning
advice. Right now there are only a handful of advisors who know how to help their clients by
quantifying the Social Security income election decision.
Of course, once you provide quality Social Security income planning solutions for your clients,
you will further deepen their trust level in your services. You will learn to inform your client that
the Social Security income election decision ought not to be made in a vacuum. Consequently,
you will need to help your clients make this decision within the context of their additional
financial assets and sources of income. Naturally, Social Security income planning then serves
as a gateway financial planning tool that leads to additional financial services and products that
you provide.
ix ClientFirst.info

Table of Contents
"Unless someone like you cares a whole awful lot,
Nothing is going to get better. It's not."
— Dr. Seuss, The Lorax
Chapter 1: 6 Ways Social Security Planning Can Grow Your Practice
How early embracers can acquire a bounty of new clients
Becoming more fluent at both understanding Social Security income planning issues and
solving election options for your clients will essentially guarantee you a large, captive client
audience for your additional financial services and products. The impending retirement needs of
the Silver Tsunami (retirees/pre-retirees) necessitate that you consider bolting on Social
Security income planning expertise to your practice. This audience needs to be better informed
about learning techniques to maximize their Social Security income. They are also greatly
concerned about the future viability of our Social Security system.
Retirees are on the hunt for more income and making a smart Social
Security income election is one place to potentially find it. The
financial collapse of 2008 has resulted in historically low yields on
fixed income investments. The shrinkage of real estate values and the
softening of the labor markets are resulting in a large number of
Americans staying in the workforce longer. Consequently, investors
will continue to look more closely to Social Security to harvest more
income. The difference between a poor and truly sound Social
Security income election can be in excess of $100,000 over a married
couples’ lifetime—in today’s dollars! In some instances the election
decision can mean hundreds of thousands in additional retirement
income.
Few financial professionals understand the most key, relevant Social Security income planning
concepts and how to relay this information to their clients. Currently, only a handful of advisors
know how to calculate and distill the multitude of strategies available to couples and singles to
help them maximize and optimize their Social Security income election. Once you have
mastered tools to guide clients through the Social Security income planning maze, you will have
1 ClientFirst.info

solved an issue that is near and dear to them. You become both servant and the expert! By
helping them solve this problem, you will grow both your revenue and level of client satisfaction.
There are several reasons why you should consider aggressively embracing Social Security
income planning within your financial practices. First and foremost, it is a core financial planning
service that many of your pre-retiree and early retirees clients will expect to receive. An
additional reason to pursue Social Security income planning is that this service is an efficient
vehicle for adding client satisfaction value and growing your financial practice. In the balance of
this chapter we cite six ways Social Security expertise can help you add value and grow your
financial planning practice.
Retaining Your Existing Clients
Even if your client is a multimillionaire, you should consider providing solutions for them on
Social Security income planning. This will show them how deeply you care about their well-
being. Retaining valuable clients is crucial to our bottom lines; as we well know, replacing a
valuable client can be both costly and tormenting.
Solving a high net worth client’s Social Security planning needs, will minimize your risk of losing
them to a competitor who is educating them about Social Security. Furthermore, if you help
them with Social Security, there is a good chance they might say something like this to their
family and friends... “Our advisor not only takes care of our portfolio, but he/she takes time to
help us maximize our Social Security income... he/she really does care about us!”
Differentiating Your Practice/Brand
You may ask yourself, “Why do so few financial advisors provide Social Security income
planning?” Naturally, most advisors like to pursue activities that potentially generate significant
revenue (i.e. elephant hunting). Chasing large investment accounts is simply “sexy” at first
glance; learning Social Security income planning and using it as a vehicle to serve and seek
high net worth individuals (HNWI), “not so sexy.” As you read further, visualize Social Security
as the peanut that can bring home the elephant!
The Social Security income and survivor benefit decision is the foundation for many clients’
retirement―a hard-earned entitlement. A perfectly natural progression in the financial advisory
process is to frame the balance of the retirement puzzle pieces around this decision. By taking
this approach and guiding your clients through the Social Security Maze, you will differentiate
2 ClientFirst.info

yourself from your competition. Also, you will be providing a true value-added service to your
local accountants, attorneys, and other strategic centers of influence.
By providing valuable Social Security income planning services, you will spread goodwill and
generate concrete solutions for your clients. As always, by serving, the “law of reciprocity” will
ultimately work in your favor resulting in more business and greater personal gratification.
Deepening Centers of Influence (COI) Relationships
Only a handful of advisors speak with accountants, attorneys, and other COIs about how to help
their clients optimize the Social Security Income Election. Accountants (CPAs) and estate
attorneys are continuously inundated with financial advisors pitching their investment products.
Providing Social Security income planning services is a non-threatening way to cultivate,
educate, and nurture relationships with these influential professionals.
CPAs and attorneys are eager to obtain knowledge about Social Security income planning. Few
accountants have ventured outside their traditional income tax and
auditing work into Social Security income planning, yet their
clients now have a need more than ever for expert Social
Security income planning advice.
Estate planning attorneys typically focus on their traditional
trust and legal work. Estate planners, just like financial advisors,
want to help their clients maximize their estate value.
Therefore, these attorneys are naturally a captive audience
for wanting to better understand Social Security income planning concepts. Moreover, attorneys
often have clients who need help understanding the survivor, divorce, and disability benefit
provisions of Social Security in addition to the more common Social Security income
optimization issue.
Consequently, accountants (CPAs), enrolled agents, attorneys, and other COIs may be looking
for a specialist resource―such as you―to help solve their clients’ Social Security planning
needs. My personal experience has been that advisors with Social Security planning expertise
are in high demand as guest speakers for many attorney and CPA group/association meetings
and functions. CPAs and attorneys can also be a captive audience for you to provide and fulfill
their required continuing education units. These units can often be provided by you once you
3 ClientFirst.info

are equipped with quality Social Security income optimization content and registered with the
appropriate certifying umbrella organization(s).
Generating Strong Media & Direct Marketing Response Rates
The Social Security income topic is well-received by the public via daily conversations, print,
radio and social media. Surfacing the Social Security income planning conversation frequently
results in fruitful client and networking conversations. The general public readership (e.g. print
newspaper) responds quite favorably to articles on various Social Security topics. I have
personally repeatedly received a multitude of call-in inquiries from articles I have written for local
newspapers and other publications.
Direct mail marketing with Social Security—as experienced by many advisors—has been shown
to provide a productive return on your marketing investment dollar. Direct mail pieces on Social
Security Income Optimization (e.g. seminar invitations) have an excellent response rate when
compared to many other traditional, “tired” financial product/service marketing pieces.
Becoming Your Cross-selling Gateway
The Social Security income planning gateway provides a seamless transition for cross-selling
your additional financial products and services. Of course, optimizing your client’s Social
Security income election need not be executed in a vacuum. The Social Security income
decision must be evaluated in the context of your clients’ complete retirement income balance
sheet: 401k, IRA, pension, annuity, life insurance, and their mortgage balance.
For example, should your clients take Social Security now or later?
• If they take it later, how do they optimally draw-down retirement accounts to bridge the
income need gap?
• Does your client need more life insurance, or will the Social Security survivor benefit be
enough for the surviving spouse?
Addressing these and many other additional key financial issues can be linked to the Social
Security income election decision and provide the opportunity to review and enhance the
positioning of your clients’ overall financial assets.
4 ClientFirst.info

Implementing Social Security Optimization Technologies
Only a handful of financial advisors seem to be aware of software planning tools recently
introduced to the marketplace to calculate Social Security Income solutions for their clients.
There is a complex interplay of Social Security income election options for married couples, in
particular, that only a handful of financial professionals fully understand. And there are hundreds
upon hundreds of possible Social Security income election combinations for a couple.
Few advisors understand the mechanics of strategies such as “File & Suspend” or “Claim-Now-
And-More-Later.” Even fewer advisors know how to quantify the results for these strategies and
present them to their clients, though these are powerful techniques to greatly assist your clients
when optimizing their Social Security income picture. The selected income election strategy is
typically a function of your clients age(s), PIA (Primary Insurance Amount, 100% full benefit
amount), relative PIA ratios for a couple, and estimated life expectancy(s). PIA and other key
Social Security income planning terms are defined in more detail in Chapter 4.
Several software vendors and financial product distributors are well aware of the burgeoning
need for Social Security income planning. These
companies have recently rolled out additional resources
and software solutions to address this growing market.
Incorporating these Social Security income planning
technologies into your practice can broaden the scope
of your billable financial planning services, provide
solutions for your clients, and positively differentiate you from your competitors.
The key to growing your practice with Social Security planning is to concretely and accurately
grasp the fundamentals and common client applications in the most time and cost-efficient ways
possible. Next, acquire effective tools and integrate them into your practice to help clients solve
their problems. Once you develop this expertise, you will want to market your powerful niche
with cost-effective marketing vehicles and distribution channels that are consistent with the
vision, staffing, and scale you have for your practice.
The key to growing your practice
with Social Security planning is to
concretely and accurately grasp
the fundamentals and common
client applications in the most
time-effective and cost-efficient
ways possible.
5 ClientFirst.info

"The storm starts, when the drops start dropping.
When the drops stop dropping then the storm starts stopping."
— Dr. Seuss, Oh Say Can You Say
Chapter 2: The Social Security “Perfect Storm” Demographic
Understanding the strong demand for Social Security expertise
The Social Security “Perfect Storm” is here. The boomers have arrived in great numbers. This
captive audience deserves and will expect accurate information and sound advice about Social
Security income planning. There
are a number of demographic,
economic, and political forces at
work that will make you, as an
advisor, an extremely valuable
financial resource for boomers.
These forces have worked to
elevate the importance of Social
Security income to the
American household’s financial
security.
There is an overwhelming need for financial professionals to become knowledgeable and
proficient in delivering quality as well as personalized Social Security solutions to this
demographic. The Social Security income election decision ought not to be made in a vacuum
but should be implemented within the context of the client’s financial big picture. It is clear that
the boomers will need your help to bring them up-to-speed on the Social Security election
income basics as well as help them to select the best election income option to complement
their overall financial picture.
This chapter will spell out the baby boomer demand, what they will need, and explain why there
is a shortfall in qualified financial professionals to meet this demand. Each highlighted item
explains why Social Security is continually becoming more important to the retiring population.
These topics of interest will provide you with some bigger picture, qualitative content of why the
Social Security issue is a “hot topic.”
6 ClientFirst.info

Why Boomers Need You for Social Security
The first wave of the baby boomer Silver Tsunami has arrived. You are fortunate to be a skilled,
dedicated financial professional as they need your help. Boomers need you to inform them
about possible changes to the Social Security System. They need you to act as a responsible
filter, to sift through media misinformation and disinformation.
Boomers will need you to facilitate understanding how and when to take their Social Security
Income benefit. Both singles and couples will need you to guide them in choosing which of the
hundreds of possible Social Security income election options will be the most suitable choice for
them. Once you have helped them and gained their trust, you most likely will be asked to assist
them in selecting financial products that best complement their Social Security election income
choice.
The Silver Tsunami has arrived!
The Silver Tsunami is rolling in―a surge of nearly
80 million Americans born between 1946 and 1964
will qualify for Social Security between 2008 and
2029. In the United States, there are about 10,000
people per day entering “boomer-hood.” A
substantial portion of these boomers have elected to
collect their reduced Social Security income benefit at the age of 62. Unfortunately, many of
them have made their decision in haste without adequately assessing the long-term financial
impact of their decision.
By 2030, Social Security's caseload is estimated to be 84 million people, an additional 34 million
to the 50 million of today. In the future, this will leave slightly more than two workers contributing
to Social Security for every retiree drawing upon Social Security. Actuaries, demographers,
economists, politicians, and the general public are preparing for an estimated $50 trillion in
future obligations over the next 75 years.
7 ClientFirst.info

The Financial & Economic Contraction... the Hunt for Income is on!
As Warren Buffet says, “When the tide drops, we’ll see who’s
swimming naked.” You can also view the Social Security
income benefit in this way.
When the financial and/or labor
market tides drop, financial
assets shrink and employment
levels become lower, you can
view Social Security and other governmental financial entitlement
programs as the large, heavily-relied upon pillars that have
remained in place.
Social Security income has become more important than ever for
American households. The stock market meltdown of 2008 and
2009 resulted in a sharp contraction of investment assets.
Following the drastic correction of the real estate market, property
values dropped significantly. Unemployment increased causing a reduction in personal income,
all this resulting in a huge diminishment in economic activity.
In response to this economic contraction, the Federal Reserve Board substantially lowered
interest rates to stimulate the economy. Consequently, Social Security income and the potential
value of savings from that income has become a more significant treasured portion of American
household assets. That is why so many American households are interested in maximizing their
Social Security income. The hunt for income is on, and Social Security is one place that the
boomers can potentially get more income.
Boomers Want to Know: What will Government do to Social Security?
• Will government reform measures be put into action to fortify the Social Security
System?
• Will there be changes in the Social Security taxation rates?
• Will the normal retirement age be extended?
• Will there be changes in the benefit calculation formula or cost of living rates for Social
Security?
Rarely seen are Wall
Street firms touting the
fact that the lifetime
Social Security benefit for
a married couple can
potentially be between
$1,000,000 and
$2,000,000.
8 ClientFirst.info

The topic of Social Security reform is continuously surfacing in both print and Internet media.
Clients want to be as informed as possible and prepared for any changes and how these
changes could impact their Social Security benefits. Unfortunately, many of the media
representations and content have distorted the actual Social Security financial solvency picture.
Basically, the Social Security trust fund is in good shape until years 2036/2037. However,
following this time period, for about every $0.75 of Social Security payroll intake, roughly $1.00
will be paid out to Social Security recipients. Therefore, corrective measures will need to be in
place to balance the cash flow for the fund. Your clients will need you to portray an honest,
accurate portrayal of the Social Security trust fund solvency.
Pension? What has Happened to Pension Plans?
The parents of boomers had one thing today’s boomers often do not―a pension plan. The
majority of today’s workers are responsible for self-funding their retirement with their own
savings. A portion of their retirement income will come from Social Security, but the balance of
roughly 65% will come from their own savings, their company 401k retirement plans with
matching contributions (in some cases) and their personal IRA accounts. As company pensions
become more of an artifact, maximizing Social Security income
becomes more important for today’s boomers.
Is the Social Security Trust Fund Going Broke?
American boomers want to know if Social Security will be there for them.
Due to both the current higher unemployment rate and significant
number of Social Security claimants, the future liquidity of the system is
now threatened. This leads to two questions:
1. “Will Social Security be there for us?”
2. “What are the changes that will be made to the system and how
will these changes affect me?”
Longevity of Boomers
Today’s boomers are living longer than ever. In 1970, the average life expectancy for males was
about 67 years and for females was less than 75 years. Today, the average life expectancy for
a male who reaches age 62 is roughly 80 years whereas the life expectancy of a female who
attains 62 is about 83 years. One out of every four 62-year-old females will live to age 90.
9 ClientFirst.info

Increased longevity provides another compelling reason for making the most informed decision
to maximize Social Security income. A boomer, such as a lady of the household, in particular,
should be aware of the longevity factor, that she is likely to outlive her spouse. To this end, the
female spouse is strongly encouraged to take a more active role in managing the household
finances.
Why Boomers Urgently Need Your Advice
The lifetime value of the Social Security income benefit is significant. A married couple, both
having a strong earnings history and claiming at full retirement age, may potentially receive a
lifetime benefit in excess of $1,400,000. In addition, if managed correctly, a good portion of the
Social Security income benefit can potentially be received as tax-free income. Furthermore, a
well-planned sequence of retirement asset withdrawals from the various pots of money can
significantly add to the longevity of a couple’s retirement income stream.
Historically, many couples and individuals have
opted to claim Social Security when first available
at age 62; however, this is changing. Many families
are now electing to take Social Security at a later
age when possible. The simple “land grab
mentality” of taking Social Security at age 62 may
be one of the biggest financial mistakes a couple
can make. Few boomers are aware of this and this is why they need your help. They need you
to explain all the considerations and productive strategies with respect to timing their Social
Security income election.
They will also need you to help them calculate how to optimize their Social Security election
income. If you take it to an advanced level, they will need your services, or the services of a
supporting financial planner, to help maximize the drawdown efficiency and sequence of
siphoning income and principal from their retirement income streams and accounts.
Boomers will be Working Longer and Retiring Later
Following the financial market meltdown of 2008 and the subsequent economic slowdown,
many Americans are now delaying retirement. Scores of boomers have experienced substantial
devaluation of their investment assets, real estate properties, and income due to the downward
The difference between a
poor Social Security
income decision and one
that is well planned can
be in excess of $100,000
(in today’s dollars).
10 ClientFirst.info

movement in the markets. As a result, many Americans will be working longer and continuing to
work while collecting Social Security. They will need you to assist them to determine how their
Social Security income benefit builds and how it can be optimally harvested as they work into
their retirement years.
Baby Boomers Wary of Wall Street
Social Security income planning is an excellent tool to help regain and earn the trust of the
American investing public. Many investors have become wary of product sales driven financial
advisors and the companies that support them. Clearly, you will have to work harder and
smarter and bring more to the table to both gain new clients and retain your existing ones. By
helping your clients navigate through the Social Security maze, you will have the opportunity to
erase some of the negatives that have been recently associated with the financial services
industry.
There is a Shortage of Professional Financial Expertise
You are fortunate to be in the early part of this perfect storm demographic. If you survey your
local financial professional community, you will discover there are few who have moved into the
area of Social Security income planning. There are a number of reasons for this shortfall in the
supply of financial professionals working in the Social Security income planning area.
Social Security income planning typically provides nominal income for the advisor on the front
end, but can often lead to a significant income potential on the back-end. Most financial
professionals, in their common business model, might hope/expect to be compensated up front
and might have struggled with implementing the
Social Security income planning as a “loss-leader”
service. However, if you are willing to be service-
oriented and stay the course, many financial
opportunities can unfold for you and your client
following your Social Security income planning
efforts.
If you are an independent advisor, you may possibly have a competitive advantage over some
of the larger banks and brokerage firms. You may have the flexibility to move quickly to
implement innovative Social Security income planning strategies as a gateway marketing and
financial planning tool to grow your business. Learning Social Security income planning could
11 ClientFirst.info

By learning the most critical 20%
of Social Security rules and
planning concepts, you can solve
roughly 80% of your client
planning scenarios.
possibly provide an opportunity for you to capture business among the boomers from larger
Wall Street bank and brokerage competitors.
If you work with a large bank or brokerage firm, my hope is that you capture the opportunities
that Social Security income planning offers. Evaluate the tools your firm has and carry out due
diligence to see what external tools are available for you. Survey your peers within your firm and
ask them about the merits of pursuing Social Security income planning. You can also ask
accountants and estate planners for input. Cross-checks and feedback from these professionals
along with the position your firm takes will help you formulate your own approach with respect to
Social Security income planning.
Social Security Income Planning: Taking the Leap, Details, Uncertainty, Inertia...
Learning Social Security income planning will take some effort on your part. It could mean extra
hours for a few months with some time spent in the evenings and during weekends. Learning
this material might require you to alter your daily work schedule. Advisors can at times fear
change in their daily routine. If you find it difficult to
make these changes, I suggest taking baby steps.
There is a lot of information associated with Social
Security income planning, so be wary of getting bogged
down in the detailed minutia.
You may wish to acquire resources to learn the most relevant, applicable aspects of Social
Security income planning. By learning the most critical 20% of Social Security rules and
planning concepts, you potentially can solve for roughly 80% of
your client planning scenarios. Begin by learning just a few of the
basic Social Security planning principles. Then begin to inform
your clients and professional alliances that you have ventured into
the Social Security planning arena. Gauge their reaction to your
newfound knowledge. As you receive feedback, continue
developing your specialty and adjust your work routine
accordingly.
Many advisors are hesitant to touch the Social Security issue
because they consider the Social Security system in limbo. With all
12 ClientFirst.info

the uncertainty reported in the media, many advisors simply might choose to bury their heads in
the sand rather than addressing this important issue with their clients. The questions “Will Social
Security be there for us?”, “What are the changes that will be made to the system?”, and “How
will these changes affect consumers?” are just some of the unknowns that can overwhelm
advisors. If financial professionals are confused about reform and what the media says, you can
bet that our clients will also be confused and concerned. Our role is to act as a filter and to
provide the most accurate relevant information possible.
The Social Security income optimization calculations involve inputting certain unknown
assumptions, such as determining the projected Social Security monthly income benefit and life
expectancy. Work with your clients closely to place the best estimates into these calculations.
This may be a stumbling block for some advisors, but our jobs often involve doing our best to
“forecast the future.” Competent financial professionals will do their best to use these
calculations and explain the assumptions built into the Social Security income planning model to
their clients to help them make wise decisions.
Shifting from Wealth Accumulation to Lower Risk Retirement Distribution?
Our job as financial professionals is to do our best to provide security for our clients’ income
needs. The United States financial market has essentially been within a narrow trading range
during this past decade. The Standard and Poor’s 500 Index of U.S. stocks peaked roughly in
August 2000 at 1,517. More than a decade later, and after a number of major swings, the S&P
500 now sits right around 1,292 (as of early January 2012). Market volatility and overall flat
returns over the past decade have created some pessimism with respect to investment returns
going forward. Consequently, pre-retirees and early retirees are more focused on preservation
and security of their retirement assets and income
stream.
Going forward, optimizing efficient retirement plan
distribution in a lower risk fashion could very well be
the name of the game for financial advisors. After the
market corrections following the 2000 Dot.com boom
and the real-estate/mortgage debacle of 2008, many
boomers have become wary of aggressive stock market growth participation. The name of their
game going forward will be to take less risk and to maintain a good quality of living and income
13 ClientFirst.info

in retirement. Social Security planning should be at the core of this strategy. Clients will want to
become more informed about the following:
• Which assets should be drawn upon first, second, etc.?
• Should I take Social Security now or wait to let it build?
• What are the consequences if I draw on my 401k or IRA now and begin drawing on my
Social Security later?
Financial advisors will need to be prepared to answer these questions for their clients. Advisors
will also need to learn how to solve the retirement distribution issues for their clients.
14 ClientFirst.info

“Simple it’s not, I’m afraid you will find,
for a mind-maker-upper to make up his mind.”
—Dr. Seuss, Oh, the Places You’ll Go!
Chapter 3: The Client Conundrum—When To Take Social Security?
The decision-making knowledge void advisors can fill
The majority of pre-retirees and early retirees do not
seem to be well informed about when and how to elect
their Social Security income. Often pre-retirees and
early retirees enter their Social Security income
eligibility period and they simply do not know what to
do. They might frequently rely upon the “advice” of a
friend or gathered bits of information from a simple
Social Security article that they have read. Rarely will
this demographic seek out, or are fortunate enough to encounter, a qualified financial
professional to help them with this important decision.
Many consumers claim and begin receiving Social Security much too early. Due to so much
misinformation found in the media about the Social Security system, there is increasing anxiety
about the future viability of Social Security. This “noise” and what many perceive to be a
legitimate concern can be an obstacle to making a sound and logical Social Security income
election decision. The local Social Security administration staff is essentially not allowed to
provide personalized financial advice to the public. Lastly, there are only a handful of financial
advisors who specialize in helping consumers maximize and optimize their Social Security
income election.
The largest single asset many families will have in retirement is the pool of money that Social
Security income will generate for them over their lifetime. Unfortunately, most people are not
well-informed about Social Security and the measures needed to evaluate and maximize this
vital retirement income stream. Failure to make logical Social Security income decisions can
adversely affect retirees’ lifetime income stream and the assets they might pass on to heirs or
charitable interests.
The largest single asset
many families will have in
retirement is the pool of
money that Social Security
income will generate for them
over their lifetime.
15 ClientFirst.info

The difference between a good Social Security election decision and a poor one can amount to
over hundreds of thousands of dollars during a couple’s lifetime. Families who fail to make a
sound decision about their Social Security income could be leaving a large sum of money on the
table. The following categorical examples proceed from the most basic income election
scenarios to well-planned methods for electing the Social Security income option. As a financial
advisor, you will commonly encounter consumers whose strategy may lie in any one of these
camps. Of course, for each unique client you encounter, it is your job to guide the client toward
making a best-fit Social Security income election.
Group 1: “Cash on the Barrel”... Need the Cash Now!
Many retirees, because of their financial situation, must take Social Security as early as
possible, typically beginning at age 62. These individuals have basic income needs to cover
required expenses and they elect to take their Social Security income checks to meet them.
They often may not have supplemental income available (pension income, rental income,
retirement account distributions, etc.), nor have they accumulated significant assets to delay
claiming their Social Security income.
Group 2: “Land grab”... Take Social Security While I Can!
The second group of individuals often has a "land grab” mentality. These folks are anxious to
collect their Social Security income at the earliest possible date, usually age 62. They may quite
likely be concerned about the financial solvency of the Social Security income system and want
to “get it while it lasts” or they may simply want to collect their Social Security income check at
the earliest possible date because they can.
This “land grab” group may not know (or care about) the long-term financial impacts of this early
income election decision. They probably do not weigh the life expectancy aspect of their
selection nor take the time to research their Social Security income election decision. They may
be aware that the longer they wait the more income they receive; however, they fail to consider
the potentially adverse financial impact of this decision to take their Social Security check at this
early election date.
Group 3: Tries to Make the Right Decision
The third group of Social Security claimants may spend some time investigating and
researching their Social Security election decision. For example, they might visit the local Social
16 ClientFirst.info

Security office to ask questions. They might also order, for example, the Social Security annual
guidebook to better understand some of the concepts relevant to making their Social Security
income election decision. Some of them may do the math using the available online calculators
for the Social Security income calculation. However, the majority of the online calculators do not
have the capability to address some of the more productive spousal planning strategies, such
as the “File & Suspend” and/or the “Claim-Now-And-More-Later” techniques.
Your local Social Security office may not be the best place to ask for customized Social Security
income claiming financial advice. Social Security Administration (SSA) staff are often
constrained or even prohibited from giving customized financial advice. SSA personnel are
required to follow their online manual called the Program Operations Manual System (POMS).
The POMS manual limits the scope of the financial advice they can provide. For example, one
section of the manual states, “You may mention the following personal factors that one might
consider. However, you should not provide any advice concerning these factors.” Later in the
same section, the manual states, “The decision about when to begin receiving RIB (Retirement
Income Benefit) is a personal one and there is no "right" answer for everyone.”
The local Social Security office is an excellent resource for many elements of Social Security
planning and claim filing. For example, consumers can order their Social Security earnings
statements when visiting the local SSA office. The SSA Staff can describe what the monthly
income benefit might be and provide information on many other Social Security planning rules
and provisions such as survivor, divorce, and spousal income benefits. Also, if you have a
question that is “out of the box” or you have concerns about a specific claiming case, they can
typically help with such issues.
However, Social Security Administration staff typically do not “solicit”
and explain some of the more intricate concepts and techniques on how
to calculate, customize, and maximize lifetime income for a Social
Security claimant.
The Social Security Administration Manual and a significant portion of
articles written on Social Security do not explain some of the more
detailed strategies and ways a couple can optimize their Social Security
income. The local Social Security Administration offices handle a large volume of public
17 ClientFirst.info

inquiries and typically provide only the basic, commonly sought-out information on the Social
Security income election decision. Effectively, it is not within the scope of their daily operations
to provide advanced software solutions to help both singles and couples make financial
decisions about optimizing their Social Security income election. Moreover, it is not the SSAs
role to evaluate the election decision within the context of the client’s larger financial situation.
Group 4: Consulting With the Social Security Income Expert, YOU!
The difference between the best and worst possible outcomes for the Social Security income
selection can amount to over hundreds of thousands of dollars in potential lost/foregone income
over a couple’s lifetime. The Social Security election decision is one of the most significant
financial choices retirees can make. To make the correct one, they need to speak with a
competent Social Security income financial advisor. In other words, YOU!
You will be able to help the client understand the basics rules and claiming techniques that must
be considered for the Social Security income election decision. Then you will work with the
client to evaluate their Social Security income statement to determine their forecasted income
levels at ages 62, 66, and 70. For those born between 1943 and 1954, the age 66 primary
insurance amount (PIA, see Chapter 4) income amount is commonly the number you might
input for your clients Social Security income calculation. Their age 66 amount or PIA is when
they receive 100% of their Social Security income benefit.
This group of claimants is diligent about determining their best-fit Social Security income
election to maximize their lifetime income. For example the Metro couple (Figure 3a) works
closely with their advisor to provide their “Social Security vitals” (dates of birth, PIA amounts,
and life expectancies). Then their advisor employs Social Security income planning software to
help them both maximize and optimize their total lifetime income benefit.
It is important to work closely with the client to discuss their potential life expectancies. Life
expectancy and existing health conditions can greatly impact the Social Security income
election decision outcome. You will also need to determine the age difference between the
spouses and discuss with them the importance of the Social Security survivor income benefit
and how to plan for it. Additionally, their relative ages and PIA income amounts will directly
impact the outcome of the Social Security income maximization calculation.
18 ClientFirst.info

Figure 3a: Social Security Vitals & Lifetime Benefits
(Sources: Right, Social Security canGROW Your Financial Practice Tool Kit™, ClientFirst
Financial and Left, Maximize My Social Security, Economic Solutions)
Choices, Choices, Choices!
There are hundreds of Social Security income election possibilities for a married couple. Due to
baby boomer demand and the increasing importance of trying to capture more Social Security
income, there are companies and software designers that have developed programs to assist in
determining the best Social Security income options.
To help your clients develop a set of accurate Social Security income election options, learn
how to utilize state-of-the-art Social Security income calculation software. You can acquire
these technologies for your financial advisory use, or even consider outsourcing this process to
a Social Security income planning specialist. These software programs typically require that you
enter your client’s age(s), age 66 PIA (Primary Insurance Amount), and estimated life
expectancies. Once you enter this data, a quality turnkey software program will generate both
the common election strategies output (i.e. electing at 62, 66, or 70) and a recommended
customized strategy designed to maximize lifetime Social Security income.
We suggest that the Social Security income decision should be considered and ultimately
incorporated into your clients’ overall financial planning strategy. The first step is to determine
19 ClientFirst.info

how to maximize the clients’ Social Security income over their lifetime. Next, you might wish to
assist them with their overall financial planning needs treating Social Security as the financial
“core element” and then build or re-construct each of their other financial strategies around the
Social Security income benefit.
It is important that you help your clients evaluate the long-
term impacts of their Social Security income election and
then coordinate this decision with the rest of their finances.
For example, if they take Social Security now versus later,
your clients may need to draw upon their 401k or IRA
accounts to bridge their cash flow
You, as a strategic financial planner, may want to show
them the effects of adjusting the sequential withdrawals from
their various asset accounts and how this affects the longevity
of their retirement income stream. Treating the Social Security income election as a core
element of your financial product solutions can serve as a powerful planning tool and
differentiates your financial practice from your competitors.
20 ClientFirst.info

"The more that you read, the more things you will know.
The more that you learn the more places you'll go."
— Dr. Seuss, I Can Read with My Eyes Shut
Chapter 4: SOCIAL SECURITY PLANNING 101
A distillation of the most relevant 20% concepts
There are many elements, rules, and strategies that together impact how a client can elect and
optimize their Social Security income benefit. As financial professionals, a helpful metaphor
might be to visualize Social Security to be somewhat of an octopus (Figure 4a). The body of the
octopus could be considered the most relevant Social Security income principles and planning
applications that we might frequently encounter with our common client cases.
The “Social Security tentacles” can be viewed as aspects of Social Security income planning
that you might encounter less frequently with your clients. For example, these element
“tentacles” might include―but not be limited to―divorce, survivor benefits, disability, how
earned income affects Social Security income, government pension offset provisions, etc.
Certain government pensions can reduce or altogether eliminate Social Security income. Please
see the Social Security website for more information on the Windfall Election Provision (WEP)
and Government Pension Offset (GPO) programs.
Figure 4a: The “Social Security Octopus”
21 ClientFirst.info

The intent of this eBook is to cover the main body of the Octopus, or the more relevant Social
Security income planning applications you might commonly encounter with your clients. Many
comprehensive Social Security reference guidebooks covering nearly all aspects of Social
Security income planning are provided through both private vendors and the Social Security
administration.
Independent vendors, such as Mercer provide an excellent and concise Social Security
guidebook for a nominal fee. The Social Security website, also serves as a reliable resource for
information.
As discussed during the beginning of this eBook, we provide the 80/20 practical approach to
learning and applying relevant Social Security income planning concepts. Our intent is to relay
and highlight 20% of the most relevant Social Security income planning rules, concepts and
techniques that will help you work through nearly 80% of your client cases.
Social Security 101: Definitions & Concepts
Following are some common definitions and acronyms you will encounter in your Social
Security income planning practice. Some are formally recognized terms established by Social
Security. However, additional terms and concepts have been informally labeled, generated by
the author and accordingly labeled as “author’s term” in the sections that follow. Many of these
selected terms have been defined in a somewhat condensed, simplified manner for the reader.
With some of these terms and rules, there are caveats and nuances with respect to their
application to Social Security income client case planning. Realize that Social Security income
planning can be complex and that many rules and caveats may apply. Consequently, you may
need to refer to either the Social Security website or specialty resources such as the Mercer
Guide to better understand rules and applications as you analyze and solve for each client’s
unique situation. For the sake of simplicity—and being mindful of the majority of cases you
might encounter—we repeatedly cite that Full Retirement Age is 66 (i.e. for those born between
1943 and 1954). We make this assumption for both the rules and terminology that follow, as
well as the Chapter 6 case studies.
FRA (Full Retirement Age): Age when a person receives 100% of their Social Security
income benefit. Age 66 for those born between 1943 and 1954.
22 ClientFirst.info

PIA (Primary Insurance Amount): The monthly Social Security income amount paid at
FRA, full retirement age (Age 66 for those born between 1943 and 1954) when you
receive 100% of your Social Security income benefit.
AIME (Average Indexed Monthly Earnings): Social Security takes your highest 35
years earnings (zeros included) and applies wage index factor forward in time and
translates to current dollars. The sum of the indexed adjusted earnings is divided by the
total months (12 X 35=420), which generate your AIME (Averaged Index Monthly
Earnings).
Age 66―Full Retirement Age (FRA): For those born between 1943 and 1954, they will
receive 100% of their Social Security income benefit, or PIA at FRA.
Age 62: Commonly, the first eligible age for a person to claim and receive Social
Security income at a reduced benefit level.
Reduction Factor or Actuarial Reduction: If the Social Security income benefit is
taken at age 62 it is reduced, becoming 75% of the FRA (Age 66 if born between 1943
and 1954) amount.
Delayed Retirement Credits (DRCs): Delaying the claiming of benefits beyond age 66.
The income benefit increases about 8% a year between ages 66 and 70.
Age 70: The age that provides the highest income benefit amount. The age 70 amount
is 132% relative to the age 66 (FRA) amount and roughly 76% greater than the age 62
benefit. Delayed credits are not applied beyond age 70.
COLA: Each year a cost-of-living inflation adjustment is applied to the Social Security
income benefit. This COLA adjustment is based upon the urban wage and clerical
workers index (CPI-W). Historically, it has averaged about 2.8%. A negative COLA
cannot lower the Social Security income benefit.
Ages 78-80 (approx.) = break-even or crossover (author’s term): If a single person
lives beyond these ages, claiming between ages 66 (FRA) and up to 70 can result in a
greater total lifetime Social Security income amount than if they had claimed at age 62.
Break-even Breakdown (author’s term): For a married couple, it becomes more
probable that at least one spouse might live beyond the age of 78-80 compared to the
single claimant scenario. This gives them the opportunity to plan their Social Security
income election to take advantage of the break-even breakdown scenario. By employing
Social Security income spousal planning strategies, married couples can potentially
lessen the age 78-80 break-even point that a single claimant encounters.
Male Life Expectancy (author’s term): According to some studies, at age 65 a healthy
male has roughly a 50% probability of reaching age 85. Note: It is imperative for a
financial advisor to have at least a general understanding of life expectancies when
guiding singles and couples with their Social Security income election.
23 ClientFirst.info

Female Life Expectancy (author’s term): Studies also cite that at age 65 a healthy
female has roughly a 50% probability of reaching age 88 and a 25% probability of
reaching age 94.
Married Couple Life Expectancy (author’s term): The studies further show a healthy
65 year-old couple has roughly a 50% probability of at least one spouse reaching age
92.
Primary Wage Earner: The spouse with the greater monthly PIA Social Security
income benefit.
Secondary Wage Earner: The spouse with the lesser monthly PIA Social Security
income benefit.
Spousal Income Benefit: A spouse―even a spouse with no income history―can
collect 50% of his/her spouse’s PIA amount at age 66. The spouse not receiving the
spousal income benefit must either file and be collecting his/her benefit or must have
filed and suspended his/her application at FRA age 66.
Dual Entitlement: A spouse is entitled to the larger of the two benefits, either benefits
based on her/his own earnings record or, if eligible, spousal benefits. The same applies
to a widow(er) who is entitled, if eligible, to survivor benefits.
Switch Strategy: A spouse can switch from his/her spousal benefit to his/her own
benefit. Or he/she can switch from his/her benefit to the spousal benefit. Note that
certain rules and caveats do apply.
Spousal Survivor Income Benefit: When one spouse dies, the surviving spouse
receives either the deceased spouse’s benefit or his/her own benefit―whichever is
higher!
File & Suspend Claiming Technique: Typically, at FRA age 66, the primary wage
earner files and suspends his/her application, stating they intend to begin collecting
Social Security income at a later date. This allows his/her monthly income benefit to
build delayed retirement credits and raises the future income amount when claimed. The
secondary wage earner then claims his/her spousal benefit at age 66 for 50% of their
spouses PIA monthly income amount.
Claim-Now-And-More-Later Technique: One spouse files a restricted application to
collect a spousal income benefit. At a later point this spouse then switches to his/her
own record to collect greater income resulting from the buildup of his/her own delayed
retirement credits. (Note: There are elements and caveats to this strategy beyond the
scope of this discussion.)
Social Security Income Benefit Software Analysis (author’s term): A Software
program where you may enter data such as client(s) age(s), PIA amounts and/or
earnings histories and assumptions, such as life expectancy and inflation. The program
then generates an optimal or perhaps several optimal Social Security Income election
scenarios to help guide the client to their best-fit solution. Data output and reports might
include standardized age 62, 66, and age 70 benefit amounts as well.
24 ClientFirst.info

Nine Important FAQs That Can Help Financial Advisors Support Their Clients
1. How much more Social Security income can I help my clients get?
Singles and couples, in particular, might often forego hundreds of thousands of dollars in
lifetime income by making their Social Security income election decision in haste without
planning. Consumers quite frequently miss out on collecting tens of thousands of dollars when
making this income election decision.
2. Why is it so critical that my client makes their income election correctly the
very first time?
Once your client makes their Social Security income election, they now have only 12 months
following claiming their income election to fix it. As of December 8, 2010, Social Security
established a 12-month time limit for the withdrawal and “re-do” of applications and now allows
only one “re-do” per lifetime. The takeaway here... when your clients choose their Social
Security income election, be sure they do it correctly the first time.
3. How much will my clients’ Social Security monthly income be reduced if they
claim benefits early? How much if they wait?
A claimant’s benefits are reduced about half of 1 percent for each month Social Security is
elected before his/her full retirement age. For example, if his/her full retirement age (FRA) is 66,
and they claim at age 62, he/she would only get 75% of their full benefit. If your client waits until
age 70, and FRA is age 66, they will receive 132% of their age 66 PIA benefit income amount.
4. How can claiming early adversely impact my client’s lifetime income?
If your client lives beyond the “break-even ages” of around 78-80, he/she can significantly
shortchange his/her own income stream. Claiming early can also greatly constrain the
exercising of spousal income benefits and switches that can potentially generate more income.
Perhaps, most importantly, if a male spouse claims early, he may greatly reduce the lifetime
income stream his surviving spouse receives since she typically has the longer life expectancy.
5. How important is the spousal income benefit for maximizing my client’s
lifetime Social Security income?
It is extremely important. Harnessing and capturing the spousal income benefit is a key
component of some of the more advanced, little-understood Social Security claiming strategies.
The spousal income benefit and/or spousal switch strategies are typically an integral component
25 ClientFirst.info

of both the “Claim-Now-And-More-Later” and the “File & Suspend” technique. The utility of the
spousal income benefit is further illustrated within the Chapter 6 case studies.
6. What is the “Age 78-80, Break-even” concept and how might it impact my
single clients with respect to optimizing their Social Security Income Election?
When a single person claims his/her benefit at age 62, he/she receives a smaller monthly
Security income check, but potentially for a longer period of time. If he/she claims between ages
63 and 70, he/she will progressively receive larger income checks, but for a lesser period of
time. If this person anticipates living past age 78-80, then it could be better to elect the FRA
benefit at age 66 or even accumulate delayed credits until age 70 then claim. (Note: For
singles, there may be multiple break-even points typically between age 78 and 80.)
7. What is the “break-even breakdown” concept and how might it impact my
married clients with respect to optimizing Social Security Income?
A healthy 65 year-old couple statistically has a 50% chance of at least one spouse reaching age
91, well past the age 78 break-even point for one person. Couples can potentially use some
combination of exercising their spousal benefit election option via claiming strategies such as
“File & Suspend” and “Claim-Now-And-More-Later” to lessen these break-even age timelines;
this phenomena can be informally referred to as “break-even breakdown.”
8. What is Social Security income optimization and why is it important for my
client?
Social Security income optimization can be viewed as the science and―to a degree―art of
helping your clients make a customized, optimal income election decision based upon their
unique financial and personal situation. The determination involves incorporating Social Security
principles, their personal health, employment situation, earnings history, retirement savings and
both their near-term and long-term financial income needs into the calculation.
9. How can Social Security income optimization software help me assist my
clients with making smarter Social Security income decisions?
Recently, software developers have designed more powerful programs to help you and your
clients do the math to make an intelligent Social Security income planning decision. The Social
Security claiming rules and caveats can be complex; a program employing sound algorithms
can help do most of the sorting through the rules and analyze the hundreds upon hundreds of
possibilities for your clients.
26 ClientFirst.info

“Do you dare to stay out? Do you dare to go in?
How much can you lose? How much can you win?
—Dr. Seuss, Oh, The Places You’ll Go!
Chapter 5: 6 SOCIAL SECURITY CONCEPTS CLIENTS NEED TO
LEARN
Addressing their key issues to maximize Social Security
For us to guide our clients and help them make their best-fit Social Security income election
strategy, we must first educate our clients and ourselves. As mentioned earlier, the intent of this
eBook is to address the main body of the Social Security income planning octopus. Our goal is
to help you learn the most relevant 20% of the Social Security rules, concepts and applications
to help you solve 80% of you client cases.
To better educate our clients we must first have an appreciation for what they need to learn (i.e.
understand their respective Social Security income knowledge voids). Also, we need to have a
good understanding of the client’s “What’s in it for me.” Typically, the “what’s in it for the client”
with respect to Social Security income planning is:
• The client wants to get the greatest amount of Social Security income possible in their
lifetime, and
• They want to optimize their income election to meet their unique personal financial
situation.
Helping your clients elect their Social Security income benefit may be one of the most beneficial
financial consultation services you can provide. You have the unique opportunity to help singles,
and especially couples, collect anywhere from tens of thousands of dollars
to hundreds of thousands of dollars of additional income over their
lifetime(s) by helping them make an intelligent Social Security income
election decision.
There are a multitude of possible combinations for how your clients
choose their Social Security income election; the election process can
be quite complicated and often confusing. Literally hundreds of strategic
27 ClientFirst.info

combinations are available to claimants seeking to maximize and optimize their lifetime Social
Security income benefit. Few financial professionals understand how to navigate the Social
Security income election waters. Furthermore, only a handful of diligent pre-retirees and retirees
investigate this important money decision at a deeper level. Thus, as a financial advisor, you are
in the unique to position to help them.
Helping your clients maximize their Social Security income benefit requires education, good
planning and the application of smart decision tools. Our Social Security income planning
research and direct field experience shows there are essentially six important concepts and
tools that consumers need to gain a better understanding with respect to making smarter Social
Security income election decisions. Throughout the balance of this chapter, we highlight these
six important tools (i.e. both financial concepts and planning tools) that pre-retirees and retirees
should consider learning about and/or utilizing when evaluating their Social Security claiming
strategies.
Tool #1: When You Claim Social Security, Get it Right the First Time
The Social Security Administration implemented an important rule change, effective December
8, 2010, that places a limited timeframe constraint for when claimants can fix and re-do their
Social Security Income election. Claimants now have only 12 months from the date they filed
their claim to choose a more favorable election method.
Prior to December 8, 2010, anyone who had been receiving Social Security income—regardless
of when they filed—could pay back the income they had received and re-elect their Social
Security income choice. Effectively, these folks were receiving an “interest-free” loan from
Social Security, and the government decided to put an end to this loophole.
What does this important ruling mean for claimants? They now must be more diligent than ever
when choosing how and when to take their Social Security income:
• If a claimant made an income election within the past 12 months, he/she should consider
reviewing it closely with a qualified financial advisor. There may still be time to re-file if
another strategy is a smarter choice.
• If a claimant is about to file a claim, he/she should be sure to evaluate the benefit
election options thoroughly.
28 ClientFirst.info

In summary, it is more crucial than ever to claim Social Security income correctly the first time.
Tool #2: Understand the Impact of Claiming Social Security too Early
Research studies indicate about half of all Americans file during their first year of eligibility—
typically age 62. Unfortunately, for a good portion of these folks, this could be a costly mistake.
Filing early could mean forgoing thousands of dollars, and in some instances (especially with
couples), over hundreds of thousands of dollars of their total lifetime income stream.
Although claimants certainly can file at 62 for benefits, most Americans will obtain greater
lifetime income amounts by waiting until they reach age 66 or even 70. While this can, in certain
cases, be a gamble, it can often be a more prudent choice.
If a claimant decides to claim his/her benefit early at age 62, a smaller check is received for a
longer period of time. If, however, the claim is made later at 66 or 70, a larger check will be
received for a shorter time period. Ages 78 to 80 are often called the break-even ages. If
claimants anticipate living beyond these ages, it could make sense for them to claim Social
Security at a later age. Some statistics show that for a healthy married couple age 65, at least
one person has a 50% chance of living to age 92.
TOOL #3: If Married, Harness Your Living Spousal Income Benefit
Married couples, in particular, can employ creative strategies to maximize their lifetime Social
Security income. To do this, they must pay close attention and learn the rules. For example,
couples should consider the often overlooked, yet powerful, benefit called the “spousal income
benefit.” Understanding how this benefit works and correctly applying it in Social Security
income planning can be a significant generator of additional income for a couple.
For example, a spouse with a low earnings history or a spouse who never worked can collect up
to one-half of the primary earner’s (i.e. spouse with the highest benefit) Social Security income
via the spousal income benefit. Had this lower-earning spouse filed on his/her own record,
he/she might receive very little, and in some cases, no Social Security income. Please note that
there are some rules, caveats and exceptions that apply to the spousal benefit. Couples should
contact a qualified financial advisor to assist them with understanding the intricacies and
claiming methods for this benefit and how it might apply and potentially benefit them.
29 ClientFirst.info

Also, few Social Security claimants—as well as many financial counselors—are aware spouses
can switch from the spousal benefit to his/her benefit or vice-versa. Properly activating and
timing the spousal income benefit is an important part of maximizing Social Security income.
Correctly timing the use of this benefit becomes a function of each spouse’s age, their Social
Security earnings history and the optimal time to implement the benefit. Once again, claimants
would benefit from consulting a qualified financial advisor for details on these spousal switching
rules.
Tool #4: If Married, Leverage and Maximize Your Survivor Benefit Income Stream
Couples will often neglect planning for their Social Security income benefit in the context of the
survivor benefit. Women typically outlive their spouse by three to four years. And they often face
longer periods of disability than men during the latter years of their lives. These prolonged
periods of adverse health or disability can result in significant financial duress to the surviving
spouse.
As discussed earlier, studies show that for a healthy couple age 65, at least one person has a
50% chance of living to age 92. Furthermore, at least one spouse has a 25% chance of living to
age 97, typically the female.
Following the death of a spouse, the survivor receives
one Social Security income check instead of two. In
some instances, the survivor’s employment pension
income might be reduced or altogether eliminated.
Therefore, it is critical for the surviving spouse to
maximize his/her Social Security survivor benefit to
make up for these potential income reductions.
One benefit of Social Security is that when a spouse passes on, the other spouse will “bump-up”
to that spouse's benefit if it is higher than his or her own benefit. Typically, for the survivor to
capture the highest Social Security income benefit, it is advantageous to have the spouse with
the higher Social Security income benefit delay claiming benefits until age 70.
A spouse can potentially drastically “short-change” his/her surviving spouse by taking Social
Security early. For example, let us say Jim decides to claim at age 62 for $1,725 per month. If
30 ClientFirst.info

Jim waited until age 70, his income amount would step up to about $3,036 per month, a 176%
increase greater than his age 62 amount.
Let us go ahead and include two claiming scenarios. First, we assume Jim and Linda are the
same age. Second, we further assume Jim dies at age 77, and Linda lives to 93. Jim receives
$1,725 a month if he claims Social Security at age 62 and $3,036 if he claims at age 70. If Jim
claims at age 62 and dies at 77, then Linda would receive $1,725 monthly for the rest of her life.
However, if Jim waits and claims at age 70, Linda
would receive about $3,036 per month. This represents
an increase of $1,311 a month, which is substantially
more than if Jim had claimed at age 62.
Furthermore, if Jim claims at age 70 versus age 62, Linda would receive an additional $251,712
of income during her 16 years of widowhood. In summary, the survivor benefit is a substantial
planning consideration, which, if ignored, can be detrimental to the surviving spouse’s financial
well-being. The survivor benefit is especially important to females, because they typically outlive
their male counterparts. Planning for a strong survivor benefit is a significant element of
comprehensive, intelligent Social Security income planning for couples.
Tool #5: Work With a Social Security Specialist to “Do the Math” to Determine Your Best-fit
Claiming Strategy
Few financial professionals are fluent and experienced in both the science and “art” of Social
Security income planning. Accountants and tax professionals are often focused on traditional
practice areas, such as tax preparation, tax auditing, and bookkeeping. The vast majority of
financial advisors work primarily in the area of investment management and administratively
maintaining client relationships.
Social Security administration personnel are typically involved with helping the public with
information requests, case management and routine claiming requests. The local Social
Security staff is typically not allowed to provide customized financial advice or to suggest case-
by-case Social Security optimization financial planning recommendations for singles or married
couples.
It is essential for consumers to make the effort to locate an advisor who specializes in Social
Security income planning. An advisor will help claimants understand the concepts and tools put
Contrary to what many might
assume, Social Security income
planning is an emerging area in
the financial services.
31 ClientFirst.info

forth in this writing. An advisor specializing in Social Security planning will have dedicated
software to help claimants evaluate the hundreds upon hundreds of Social Security income
claiming possibilities to help them optimize their income. Contrary to what many might assume,
Social Security income planning is an emerging area in the financial services. The rules for
electing Social Security have been changing. Consequently, it is advantageous for prospective
Social Security claimants to take extra time to find a qualified Social Security planning
professional who can help with their election decisions.
A significant portion of pre-retirees and early retirees do not “do
the math” to make the optimal Social Security income decision
for their unique situation. First of all, many folks are not aware
that these Social Security claiming strategies even exist. If they
are aware, many do not take the time or are not counseled by a
financial advisor who is familiar with how to maximize Social
Security income. Failure to examine and implement these
advanced claiming strategies can result in a significant reduction in
lifetime income for many retirees.
There are compelling financial income incentives for applying some of the advanced claiming
strategies. Depending on a couple’s Social Security “vitals” (earnings history, relative ages, and
life expectancy) and goals, they may wish to apply claiming strategies such as the “File &
Suspend” or “Claim-Now-And-More-Later.” In short, these strategies all involve the timing of
filing for benefits and utilization of the spousal and survivor benefit concepts described earlier in
this report to maximize lifetime income.
A significant portion of those who claim Social Security execute the “land grab” strategy and
take it as soon as possible at age 62. Others partially understand the potential merits of waiting
and claim later at age 66 or 70. Those who become educated and carefully apply these
advanced claiming strategies may be rewarded with significant additional retirement income.
Tool #6: Orchestrate Your Social Security Election Plan in the Context of Your Retirement
Income Stream and Investment Holdings
Some Social Security claimants think their Social Security income will always be completely tax-
free. For many, this may not be the case. Up to 85% of Social Security income may be taxable
due to what is called provisional income. Provisional income, according to Kevin McCormally of
32 ClientFirst.info

Kiplinger, is “... basically your adjusted gross income plus any tax-exempt interest, plus 50% of
your Social Security benefits.”
Several sources of income can contribute toward triggering the provisional income taxation
thresholds. These income sources may impact the taxation of a claimant’s Social Security
income benefit. These income sources include, but may not be limited to:
• Distributions from your 401k or IRA account(s)
• Wages, pension income
• CD, money market, savings interest
• Dividends from stocks, bonds, mutual funds
Of course, if mindful, the Social Security income benefit taxation can potentially be reduced.
Therefore, it is important to investigate and determine in which sequence a claimant might draw
upon his/her retirement income stream and/or retirement asset buckets. When and how Social
Security income is elected can significantly enhance or reduce the longevity of a household’s
retirement assets and income stream. Questions claimants need to consider:
• Should I take Social Security early or later?
• Which Social Security income election strategy will present the most lifetime income?
• Does it make sense to first draw upon the 401k and/or IRA account(s) and then claim
Social Security later?
• Does it make sense to re-distribute some assets into other investment vehicles that
minimize, or altogether possibly eliminate, the taxation of Social Security benefit?
Chapter Summary
As financial advisors, we need to fully understand the Social Security income planning concepts
and considerations highlighted in this chapter, which uncover many important elements
necessary to help our clients maximize and optimize their Social Security income election.
We need to develop the knowledge, resources, and practical experience to help guide our
clients through the Social Security income election maze. If you are a financial advisor with a
holistic practice approach, you will need to help your client synchronize their Social Security
income election with their bigger picture retirement income plan. Your client’s Social Security
33 ClientFirst.info

income election could be one of the most important money decisions they make in their lifetime,
so you will want to help them do everything possible to get it right the first time.
34 ClientFirst.info

“Why, I’d have a scramble more super than super!
Scrambled eggs Super-dee-Dooper-dee-Booper
Special deluxe à-la-Peter T. Hooper!”
—Dr. Seuss, Scrambled Eggs Super!
Chapter 6: FIVE RELEVANT CLIENT CASE EXAMPLES
Applying concepts and adding value for your clients
The objective of sound Social Security income planning is
to help better serve our clients by assisting them with
maximizing their lifetime Social Security income while
simultaneously developing an overall best-fit solution. A
quality best-fit solution includes maximizing their Social
Security income stream as well as augmenting cash flow
and enhancing the longevity of their retirement income
stream.
We can consider this chapter as a demonstration of Pareto’s 80/20 rule within the realm of what
might be considered somewhat commonly-encountered Social Security income planning cases.
We will apply the most relevant 20% of the Social Security income planning tools you have
learned thus far in this eBook to each of the five cases. By having a good understanding of the
rules and techniques applied in these cases, you should obtain a better understanding of
concepts and techniques which may help you offer solutions for roughly 80% of your client
cases.
Each couple’s—or single person’s—unique Social Security “vitals” will determine which election
claiming strategy might work best for them. Their best-fit Social Security optimization strategy is
typically a function of their Social Security “vitals,” such as age, respective and relative primary
insurance (PIA) amounts, projected lifespan and unique financial circumstances. Some rules-of-
thumb apply to many client situations. However, each client is unique and for many of them we
must be prepared to design customized, best-fit solutions for their specific financial situation.
Of course, there is an endless possibility of potential client income planning case scenarios you
might encounter. Each client will have a unique earnings history, varying projected estimates for
However, each client
is unique and for
many of them we must
be prepared to design
customized, best-fit
solutions for their
specific financial
situation.
35 ClientFirst.info

life expectancy and unique cash flow needs and goals. This makes it critical to employ
intelligent software that can run the complex algorithms to generate your client’s best-fit lifetime
election decision. Candidly stated, within the specialty financial planning niche of Social Security
income planning, quality software will be your best friend.
In this chapter we examine five Social Security income planning case studies. The first two case
studies (Cases 1 & 2) illustrate married couples, each couple having distinctly different Social
Security earnings histories and life expectancies. Case studies 3, 4, and 5 are directed toward
helping you better understand Social Security income claiming issues and strategies within the
realm of the female demographic. These three case studies address women in each of their
various single relationship states: single-for-life, divorced, and widowed.
Because a good portion of American couples claim Social Security early, the surviving female
spouse, due to her longer life expectancy, can often be adversely impacted by the male
claiming Social Security income at an early age. Addressing this potentially adverse situation for
females requires advisors to become knowledgeable about the extended life expectancies of
women relative to men. Women, in particular because of the likelihood of spending some time in
widowhood, should pay very close attention to their spouse’s Social Security income election
claiming strategy.
Case Study #1: Jim & Linda Heartland, Unequal Earnings Histories (large PIA difference). “File
& Suspend” Strategy
Jim and Linda Heartland can be considered a more “traditional” couple. Jim worked full-time
throughout his career and was a strong wage earner. He has a PIA of $2,300. Linda was a stay-
at-home mom who worked mostly part-time jobs and has a PIA of $300. Jim, age 66, is five
years older than Linda, who is age 61.
They have discussed their life expectancies and family health histories, determining that Jim
expects to live to age 77 and Linda to age 93. Because Linda expects to live quite a bit longer
than Jim, one of their main planning concerns is that she collects as much Social Security
survivor benefit income as possible throughout her years as a widow.
After a careful review and calculation of various scenarios, it is determined that the Heartland’s
optimal Social Security income election involves a specific sequence of claiming steps and that
36 ClientFirst.info

they employ the “File & Suspend” strategy to generate a higher amount of total lifetime Social
Security income. We highlight the Heartland case in the following video:
Video: Case Study #1
View a video software demonstration of the Heartland “File & Suspend” case solution.
Case Study #2: Bob & Mary Metro, Similar Earnings Histories (similar PIAs) Claim-Now-And-
More-Later
Bob and Mary Metro are a working couple considering retirement soon (Figure 6a). They have
had a life expectancy “chat” and have placed their projected life expectancies at 82 and 86 for
Bob and Mary, respectively. Mary is the primary wage earner with a projected PIA of $2,200 and
Bob is the secondary wage earner with a PIA of $2,000. The Metros both have a fairly strong
and relatively equivalent Social Security earnings history. Bob and Mary’s situation can be
considered to portray a “modern day family,” a couple where both spouses have continually
worked throughout their careers and might tend to reside either within or near a metropolitan
area.
37 ClientFirst.info

Figure 6a: The Metros Social Security “Vitals”
(Source: Social Security canGROW Your Financial Practice Tool Kit™, ClientFirst Financial)
In the case of the Metros, the Claim-Now-And-More-Later strategy yields the greatest lifetime
income benefit for Mary and Bob. Mary, between ages 66 and 69, collects her $1,000 monthly
spousal income benefit off John (1/2 of John’s $2,000 PIA amount). Bob begins collecting his
own benefit of $2,320 per month at age 68 and collects this income until his passing at age 82.
At age 70, Mary switches to her own higher benefit amount of $2,904. Note that Mary’s own
benefit has grown “in background” to $2,904 at age 70 from her age 66 PIA amount of $2,200.
When Bob dies at age 82, Mary retains her own higher benefit amount of $2,904 for the balance
of her life (i.e. until she passes at age 86). This strategy is illustrated in Figure 6b.
Figure 6b: The Metros Claiming Strategy
(Source: Social Security canGROW Your Financial Practice Tool Kit™, ClientFirst Financial)
38 ClientFirst.info

The Claim-Now-And-More-Later technique yields the greatest lifetime income amount for Bob
and Mary at $1,000,552 (Figure 6c). This exercise shows how the Metros can maximize their
lifetime Social Security income. However, holistic financial planning practices suggest we
optimize the Metro’s Social Security income decision to dovetail with their specific unique cash
flow and retirement income needs. For example, if Bob and Mary need more cash flow during
their early to mid-60s, one or both need to elect and take the Social Security income earlier.
This, of course, might reduce the chances of them capturing the greatest lifetime income
amount.
Figure 6c: Metro’s Lifetime Income Benefits
(Source: Maximize My Social Security, Economic Solutions)
Bob and Mary’s big picture objective is to determine which Social Security income election
claiming technique(s) will help them both maximize their lifetime benefit amount and optimize
cash flow needs and goals. Of course, their total resultant lifetime income amount will be
dependent upon their income election age(s), their actual life expectancy experience and their
selected claiming techniques.
39 ClientFirst.info

Figure 6d below illustrates the early election age, age 66 (FRA, Full Retirement Age), and
Recommended Strategy Age total lifetime dollar income benefit amounts. These respective
amounts are further calculated and displayed in terms of short, normal and long life span
scenarios, which are 10 years less than, equivalent to, and 10 years greater than Bob and
Mary’s earlier stated lifetime expectancies. The normal life span scenario is the projected life
expectancies of 82 and 86 that Bob and Mary have previously provided.
Figure 6d and Table 6b: Lifetime Benefits versus Life Spans
(Source: Social Security canGROW Your Financial Practice Tool Kit TM, ClientFirst Financial)
40 ClientFirst.info

Video: Case Study #2
View a video software demonstration of the Metro case solution.
The Sally Case Studies
Case Study #3 – Sally Solo, Single-for-life, Never Married
Sally Solo is a single woman who has never married. She has
worked full-time for many years and wants to retire at age 60
to pursue other opportunities. Based on her health and family
history, she projects her life expectancy to be 88. She has a PIA
of $1,600. Taking into consideration her budget, cash flow needs, and retirement savings, she
wants to know if she should file her claim for Social Security income at age 62, 66 or 70.
If she files at age 62, she will receive a monthly amount of $1,207 (75% of $1,600) for 26 years.
Claiming at age 66 will allow her to collect her full PIA of $1,600 a month for 22 years. By
waiting until age 70 she will collect a monthly amount of $2,112 (132% of $1,600) for 18 years.
41 ClientFirst.info

Waiting to claim until age 70 turns out to be Sally’s best claiming strategy and will provide her
with a lifetime benefit of $481,536. Her worst strategy is claiming at age 62, which would only
give her $376,584 over her lifetime, a difference of over $100,000.
The graph below (Figure 6e) shows Sally’s situation. You can see that by claiming at age 62
she receives a smaller monthly amount over a longer time period. By waiting to age 70 she
receives a larger monthly check for a shorter time.
Figure 6e: Sally Solo—Single, Cumulative Lifetime Income
Notice that between roughly ages 78 and 81, all three strategies for Sally have nearly the same
total lifetime cumulative earnings up to those times. These are typically referred to as
“breakeven” ages. If Sally had a life expectancy of 78 or younger, her best claiming strategy
would be to claim and begin collecting at age 62 since she would then collect a larger total
cumulative benefit amount by age 78. Since she expects to live to age 88, delaying her election
age to 70 is to Sally’s advantage.
Case Study #4 – Sally Solo, Divorced (claims ex-spousal benefit)
Consider now that Sally Solo’s relationship status is a 62 year old divorced woman. She has the
option of collecting a divorced spouse (or ex-spousal) benefit off her ex-husband’s earnings if
her situation meets certain criteria. In order to be eligible for a divorced spouse benefit, the
following conditions must be met:
42 ClientFirst.info

• Your ex-spouse is entitled to Social Security benefits,
• Your marriage lasted 10 or more years,
• You have been divorced for at least 2 years,
• You are 62 or older and have not remarried,
• Your ex-spouse is 62 or older, and
• The benefit you would receive on your own earnings is less than what you would receive
off your ex-spouse.
Sally’s situation meets all these criteria. We will assume her PIA is $1,600 and her ex-husband
has a PIA of $2,000. By evaluating some of her various options and doing the math it turns out a
strategy for her to get more lifetime income is a combination of collecting an ex-spousal benefit
and then switching to her own benefit at a later date.
At age 66 Sally begins claiming an ex-spousal benefit of $1,000 (50% of $2,000) per month until
she reaches age 70 (Figure 6f). At that time she switches to her own benefit, which has grown
to $2,112 due to delayed retirement credits as noted above. She will collect this amount for the
remainder of her life resulting in a total benefit of $529,536.
As discussed above, if she had simply claimed on her own record at age 62, she would have
received $376,584 in lifetime income. As you can see, had she not been aware of her ability to
collect an ex-spousal benefit and later switch to her own higher benefit, she could possibly have
left up to $152,952 ($529,536 - $376,584 = $152,952) of lifetime benefits uncollected Figure 6h.
43 ClientFirst.info

how-to-grow-your-financial-practice-with-social-security-income-planning

how-to-grow-your-financial-practice-with-social-security-income-planning

Recomendados

Recomendados

Más contenido relacionado

Destacado

Destacado (15)

Último

Último (20)

how-to-grow-your-financial-practice-with-social-security-income-planning