I can succinctly sum up the attitude of Social Security Administration agents when addressing the question of when to begin benefits. In fact, I can do so in just four words: "Um Im not sure.
The agents cant provide adviceperiod despite their hard work and dedication and regardless of Americans penchant for asking questions. Its a problem, and a look behind the scenes at the agency reveals clues as to how it evolved this way.
Social Security training is geared to help the majority of the public, meaning they must get the recipient as much as they can as soon as they can. Its not only a part of their training, its a policy requirement, and they look at the individuals situation on the day they file, not over a 20- or 30-year retirement horizon. It leads to an early claiming bias, which one might find antithetical to the financial planning processand it is, but so be it. They dont focus on life expectancy, but on current needs, which in a way makes sense. While advisors deal with a significant percentage of clients who can afford to delay the start of benefits, the overwhelming majority of the population must immediately rely on Social Security. Its reflected in the fact that 70% of Social Security recipients claim early.
Remember, according the latest research from SSA, Social Security is the major source of income (providing at least 50% of the total) for 52% of beneficiary couples and 74% of individuals. It constitutes almost all of the income for 22% of couples and 47% of individuals. These statistics drive agency policy and agent behavior.
SSA employees can tell you the amount a client will receive at age 62, full retirement age and if they delay to age 70, but those are rules, not strategies. They cannot tell you which age makes the most sense given their individual situation, and they do not take other retirement resources into account. Indeed, they dont have the capability to do so; even if they did, the simple fact is that its not relevant to the filing process.
It gets worse.
According to a congressional report released in June, SSA has closed 64 field offices since 2010, the largest five-year decline in field offices in its 79-year history. Blaming budget cuts, the agency has also closed 533 temporary mobile offices that serve remote areas, as well as laid off 11,000 workers over the last three years. For the field offices that are still open, hours of operation have been reduced.
The cuts come as demand for its services has significantly increased as baby boomers prepare for retirement. The result will be longer hold times, reduced services and increased frustration, according to the bipartisan report.
Yes, Congress is pushing back, but the best outcome is simply a return to the status quo, one in which agents must balance the need for dispensing help with their call-time metrics. They were understaffed in key areas before the cuts, and the phone and walk-in wait times are significant.
Its why offering professional Social Security advice, with the aid of software, is so crucial for advisors. Its a system more people are relying on for a greater portion of their retirement assets at the exact time publically-available resources shrink. Theyll come looking for desperately needed help, which represents an incredible opportunity for advisors who can give it. Are you one?
William Meyer is founder and managing principal of Social Security Solutions, a software firm that helps advisors and their clients optimize Social Security claiming strategies. More information is available at www.ssanalyzer.com.
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