A Social Security spousal benefits windfall
Even rudimentary Social Security knowledge can turn financial advisors into instant superstars in their clients' eyes.
Kasha McLemore, a Raymond James financial advisor with First Tech Federal Credit Union in Beaverton, Oregon, wowed a client when she informed her that she could collect Social Security benefits on her deceased husband's work record.
"I never even would have known that I was missing out on this benefit," the incredulous client told McLemore.
The widow, then 63, met with a Social Security agent and began taking her late husband's monthly benefit of approximately $1,800. That amount was about equal to what hers would be if she waited until her full retirement age at 66. The client, however, opted to defer her own benefit until she turned 70, at which point it would be approximately $2,376 a month.
"I never even would have known that I was missing out on this benefit." – client
The claiming strategy notably boosted the widow's retirement income. If she lives to 85, she will have received roughly $578,880 in benefits. Had she merely claimed her benefits at 66, she would have received only $410,400, leaving a considerable $168,480 on the table.
"She had no idea," McLemore says of her client. McLemore estimates that about half of clients are unaware that they can claim survivor benefits before claiming their own benefit at their full-retirement age or at 70. The lack of awareness is prevalent among many of her clients — particularly women who tend to abdicate the responsibility of working with an advisor to their husbands, McLemore says.
Like most widows, McLemore's client was initially unwilling to talk about her late husband, who died suddenly from cancer two years after he retired at 61. The long-married couple had traveled the country in a fifth-wheel travel trailer prior to the husband's unexpected death.
"She was in shock after he died," McLemore said. Still, by gently pushing forward with their conversation on retirement planning, McLemore was able to encourage the client to look into a widow's Social Security benefit.
The client was glad she did. "You are personally responsible for making my retirement more secure by this suggestion alone," she later thanked McLemore in an email.
An earlier version of this story ran in January 2016. It has been updated throughout.