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Thought Leadership in Action

Helping Clients Decide When to Claim Social Security

Deciding when to claim Social Security is a multifaceted decision for people as they approach retirement age. With so many factors to consider, such as employment situation, ongoing financial needs and the dollar reduction from claiming early, clients need professional guidance to make the best decision for their needs.

Here are just a few of the considerations your clients should consider before they make an early claim on their Social Security benefits.

Early Retirement or Unable to Work

According to the Social Security Administration, as of Jan. 3, 2023, the full retirement age is 67 for people born in 1960 or later, with benefits available at 62 for individuals, albeit with a permanent reduction. As your clients consider full or partial retirement from the workforce and possibly taking Social Security benefits early, it’s important to walk them through their current situation and finances.

Questions to ask include: What's your client’s current job role? Do they want to keep working? Do they have another job available? Other factors to consider include clients’ plans for the rest of their careers, whether they’re currently out of work and whether they have access to pensions from previous employers. A client turning 62 with no other expected source of income might want to opt into Social Security, whereas someone who’s working full time and has a government pension might wait until full retirement age, for example.

Some clients’ ability to work is affected by health concerns, including disability. For those clients, the conversation should also cover whether they’ve applied for Social Security Disability Insurance benefits.

Investment Opportunities

 If your client wants to collect Social Security early and can cover their expenses with other income or assets, they might be interested in investing their Social Security payments. While it’s possible to generate greater returns this way, there are also risks.

Sequence-of-returns risk (sometimes called “sequence risk”) describes the phenomenon that the order of investment returns matters more than the average return during retirement years. Make sure clients are aware of the risks of these investment strategies and the potential tax implications. Advise them of alternatives, such as investing other assets or focusing on lower-risk investments such as bonds, cash equivalents and dividend stocks.

Another thing to walk through with clients is their break-even age — the point when the total benefits received at full retirement equal or exceed the benefits the client would receive if they opted in at 62. Clients’ health history and estimated life expectancy are just some of the factors to consider here.

Fear About Social Security’s Viability

According to a 2023 federal report on the state of Social Security and Medicare, the Social Security Old-Age and Survivors Insurance will only be able to pay 100% of benefits through 2033.

Some clients approaching retirement age might wish to claim Social Security benefits early because they don’t believe the program will remain solvent, especially with an aging population and the current projections

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