Advisors need to talk to their clients about Social Security or risk losing them, according to a consumer survey Nationwide Financial Retirement Institute released today.
Most respondents nearing retirement expect their financial advisor to help them maximize their Social Security benefits, with four in five saying they would switch to another advisor if their current advisor failed to do so, the survey found.
We urge advisors to have a Social Security conversation with their clients because its a retention play, said David Giertz, president of distribution and sales for Nationwide Financial.
Social Security represents a significant portion, up to 40%, of an average Americans retirement income, according to Giertz. Its a very important part of a [retirement] plan, so financial advisors should be having that conversation, he said.
Its especially critical that advisors be able to help their clients with the important question of when to start claiming benefits. If a person turns on their Social Security too soon, over a 25-year period of time that could be up to $300,000 of lost benefit, which is about $12,000 a year or $1,000 a month, so thats a lot of money to give up, said Giertz.
Almost three in four of the respondents said they expect their monthly Social Security benefits to cover their out-of-pocket health care costs, which Giertz said is unrealistic. According to Nationwide Financial, health care costs for a healthy middle-income couple retiring next year at full retirement age will eat up 69% of their Social Security benefits. In 10 years, it will devour almost all, or 98%, of the couples benefits. In 20 years, Social Security wouldnt be enough to cover their out-of-pocket healthcare costs, forcing the couple to look elsewhere to pay for those expenses.
Despite strong demand for guidance on Social Security, only 12% of the respondents said they have a financial advisor who gave them advice on the topic, according to the survey results.
Given the complexity of Social Security, many advisors dont feel they have the expertise to talk about the how best to maximize benefits, so they avoid bringing it up, says Charley Gillespie, a spokesperson for Nationwide Financial.
To help boost advisors comfort level with the program, Nationwide Financial launched a new online tool dubbed Social Security 360 Analyzer and deployed a team of specialists to provide advisors with education and support.
The online tool, and the support program surrounding it, was created to improve advisors understanding of clients options for maximizing their Social Security benefits, the company said in its press release. It compares the election strategies available to people based on their personal situation, explained Giertz.
The tool will show some of the best scenarios on when a customer should start their Social Security benefit and then how they should start it, he said.
The tool, one of the recipients of the Bank Insurance & Securities Association 2014 Technology Innovation Award, uses patented software from Social Security Timing that helps evaluate filing strategies and the impact to clients retirement incomes plans. With it, advisors can generate reports, including claiming instructions, cash flow, and income gap. They can also personalize the reports to include alternate election strategies suggested by the advisor or the client, Nationwide Financial said.
The tool and support program help simplify Social Security so advisors dont feel like they have to be experts, noted Gillespie. They know they can get anything answered not just from the tool but team specialists that come out there, he said.
The survey, conducted online between Feb. 27, 2014 and March 4, 2014, canvassed 903 adults aged 50 or older who are either retired or plan to retire in the next 10 years.
Register or login for access to this item and much more
All Bank Investment Consultant content is archived after seven days.
Community members receive:
- All recent and archived articles
- Conference offers and updates
- A full menu of enewsletter options
- Web seminars, white papers, ebooks
Already have an account? Log In
Don't have an account? Register for Free Unlimited Access