Advisers, take note: If Social Security planning is not part of your practice, you're missing out.

Even after the recent changes to Social Security, analysis and optimization of the federal program can mean $100,000 or more for your clients.

To be sure, the rule changes made things more complicated. I interact regularly with numerous financial advisers and have seen them struggling with how to integrate Social Security planning into their practice and client experience.

You need to be adept in two areas: 1) How to assess and optimize Social Security; and 2) How to put Social Security claiming strategies together with a client’s outside retirement savings. I call these two steps Social Security "coordination,” and will give you four reasons why such coordination is critical to giving advice and helping households in retirement.

1. Huge amount of money
Social Security is the largest asset most American retirees have. Typically, benefits will account for more than $1 million of cumulative income for a couple, and a good strategy can find an additional $100,000. Yes, even after the rule changes, it is common that when you add up all the Social Security payments your client will receive, it will be larger than their outside retirement savings. Make sure your clients know they should spend as much time analyzing their Social Security claiming options as they spend analyzing their 401k balances. Don’t cut a corner assessing claiming strategies as over 10,000 alternatives exist for an average couple, and it’s easy to miss good options by not analyzing all the details. Many advisers miss big opportunities and open themselves up to risk by not evaluating all the alternatives that can add important income for their clients.

2 – Lumpy cash flow
A Social Security claiming strategy can have different benefit amounts that change over time. Also, there can be elements of delay where no income is generated. These income gaps and varying income levels result in what I call “lumpy flows.” The implication is that additional income will be needed to fill these gaps and variations. Almost everyone will claim Social Security, and understanding the cash flow topography of Social Security is critical so you can help generate the appropriate cash flow from your client savings to meet spending needs.

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Ironically, most Americans should withdraw their tax-deferred savings first while they delay Social Security. This strategy maximizes Social Security benefits and reduces Social Security taxes and RMDs once the client starts benefits.

3 – Increase portfolio longevity
You don’t need to be a rocket scientist to understand that if you can create more Social Security income for clients, they won’t need to drain as much of their retirement savings. Consequently, you take less out of the portfolios you manage for your clients. The impact of this element of “coordination” is profound. I've done research that illustrates how optimizing Social Security can add as much as 10 years of longevity to a retiree’s portfolio. Since most Americans have not saved enough for retirement, simply understanding how maximizing Social Security can make client’s money last longer is a very important assessment you should be making.

4 – Order of withdrawals
The Social Security claiming strategy, whether optimized or not, has a huge implication on how clients should tap savings and investments. My recent research with Dr. William Reichenstein of Baylor University showed by varying the order of withdrawals we could find over six years of added longevity for a client. Remember, the lumpy cash flow of Social Security requires you to fill in the gaps. That means you must figure out the right investments and asset classes to liquidate. We showed by withdrawing from multiple taxable and tax deferred accounts (e.g., IRA or 401k) together, we could add significantly more time over the standard withdrawal sequences of taking taxable money, then tax deferred and finally tax exempt savings. Ironically, most Americans should withdraw their tax-deferred savings first while they delay Social Security. This strategy maximizes Social Security benefits and reduces Social Security taxes and RMDs once the client starts benefits. While this general strategy may be best for mass-affluent clients (not high-net-worth clients), it is clear that coordinating a Social Security strategy with a withdrawal sequence using multiple accounts is always better than what is in all the current financial planning software.

Putting It All Together
The four components above show you that coordinating Social Security with a retirement income withdrawal strategy is critical. Why? Simply put, you can make your clients’ money last longer. Every time. By focusing in the right areas, you can make a huge difference. Ironically, all the key elements of coordination are controllable and can help your clients make an informed decision. Your client controls when they start Social Security. Your client controls the order they draw down their assets. These elements handled in a coordinated fashion can result in a lot more money.

I conclude that coordination is a great, differentiating, value proposition for advisers in helping retirement clients and prospects. American retirees are scared they will run out of money. By implementing the Social Security coordination components I have outlined, you can get more for your clients and make their money last longer.

Bill Meyer

Bill Meyer

Bill Meyer is chief executive of Social Security Solutions and the developer of Income Solver, software for advisers to create optimized withdrawal strategies.