Offering clients the best advice about Social Security-claiming strategies can be dauntingly complex.

Some advisers are using software programs to cut through the confusion and help clients maximize benefits.

Bloomberg News

There are myriad reasons.

For starters, the Social Security-claiming process has become even more complicated. The end of the file-and-suspend strategy is perhaps the most fundamental change with which advisers are grappling.

Under this provision, one spouse could file and delay benefits while the other claimed Social Security. This had the effect of significantly boosting total lifetime benefits.

Although this loophole is closed to new filers, there are still dozens of other strategies designed to maximize benefits, most of which can help couples. However, a general lack of knowledge on claiming strategies leads millions of people to make bad decisions about Social Security.

For example, some 60% take benefits at 62 -- the earliest possible age -- even though that move results in permanently lowered monthly benefits.


Even without the availability of file and suspend, advisers must navigate thousands of other factors and rules. There are more than 8,000 strategies and 2,700 separate rules on benefits, which is why advisers should take advantage of specialized software customized to the task.

Here is one area where the claiming question can still get gnarly: With couples, who should file first and when? As many advisers know, anyone gets an 8% annual bonus for waiting to file for benefits between 66 and 70.

But total benefits are still gauged to lifetime earnings. Individuals can still claim up to half of their spouse’s -- or ex-spouse’s, with certain restrictions -- benefits.

The best strategy isn’t always clear, and there are many ways to approach it.

With yields low and the uncertainty of retirement looming in the minds of baby boomers and retirees, maximizing Social Security benefits has never been more important. Unfortunately, not all retirees are doing that.

Although Larry Heller, a CFP and the principal of Larry Heller & Associates in Melville, New York, says that “file and suspend was a big part of our Social Security planning,” he has found that “spousal analysis is still critical for us.”


He uses a program called Savvy Social Security to run a detailed analysis that offers clients the best possible strategies.

What should advisers know in the context of comprehensive planning that software can break down? As with any other planning element, advisers should look at life expectancy, lifetime total benefits, retirement spending levels/cash flow, other savings, pensions and the impact of inflation.

With Social Security, advisers should also understand benefit reductions due to offsets such as being a public employee and which benefit levels are available, given earnings records and the age when the benefit is claimed.

Generating a customized report that offers a number of options is essential when using any software, Heller says.

It also offers clients another frame of reference.

“It allows them to see Social Security as an asset,” Heller says.

With the growing prevalence of defined-contribution plans such as 401(k)s, Social Security has become even more important. Unlike DC plans, the government program provides an inflation-indexed income stream that can grow in monthly payments from age 62 to 70.

So making the right timing decision, in harmony with other retirement fund withdrawals, is critical.


Unlike the difficult-to-navigate Social Security site, most adviser-oriented packages provide numerous scenarios for clients.

Wes Shannon, a CFP and the principal of SJK Financial Planning in Hurst, Texas, uses Social Security Analyzer to help clients with tax optimization and assessing the best age to file for benefits.

Like many advisers, he previously struggled with manual input and cumbersome spreadsheets. The program Shannon now uses not only generates multiple scenarios but also produces graphics that he can show clients while working through some complex problems.

“I had a 70-year-old client liquidating an [individual retirement account] and annuity,” Shannon says.

“I needed to know which account to take withdrawals from, and a Social Security strategy,” he says. “That used to take me a whole day to calculate.”

Another key utility in the new generation of Social Security software is breakeven analysis, that is, the period that it will take to justify delaying taking benefits.

The government’s tools have had some problems with this function. A few years ago, the Social Security site’s breakeven calculator was pulled because it gave misleading results.

Using private Social Security software packages, however, advisers can give a more precise picture.

“We used Excel at first for breakeven analysis,” says Ed Jastrem, a CFP and the director of financial planning at Heritage Financial Services in Westwood, Massachusetts.

“We wanted to know whether clients should file at normal retirement age [66 for most Americans] or delay,” he says. “We used Social Security Income Planner to help us with complex strategies.”

Ideally, all software should also go deep in answering questions about how Roth IRA withdrawals, minimum required IRA distributions and portfolio allocations mesh with Social Security decisions.

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