Your retired clients won't be receiving a cost of living increase next year in their Social Security benefits. And judging from public reaction, many of them are upset.
Fair enough, nobody wants to get less money than they expected. But much of the anger is misplaced, and you have been handed a perfect teachable moment. If clients ask you about it or even if they don’t, you have a chance to educate them on how Social Security works and how it’s still an important part of their retirement plan.
Make sure they understand the lack of an increase this year was not an active decision by Republicans, Democrats, President Obama, corporate CEOs or anyone else. It’s simply a result of macro trends; specifically, that there’s been no recent inflation officially. It’s unfortunate that the official measure of inflation, the CPI-W, doesn’t truly capture most elders’ real expenses, but the lack of an increase is not a vast government conspiracy. True, there are other measures of inflation that are better adjusted to elderly people, but the broad, overall gauge is still used in government calculations.
To make this issue even worse, it coincides with a large increase in Medicare premiums for about 30% of people. It would affect more people if not for the way these two programs are linked and a hold-harmless provision that prohibits increases in Medicare costs if there’s no Social Security COLA to offset it.
Don’t dismiss this with clients with an air of “it is what it is.” It’s the perfect time to remind them that the Social Security system has some wonderful aspects to it, some of which are not well-known. For instance, the fact that someone who has reached their full retirement age can suspend his or her Social Security as many times as they want; or the fact that you can temporarily unsuspend in order to qualify for the hold harmless provision.
It’s also a good time to cast Social Security in their eyes as a crucial help, but not the be-all and end-all of retirement planning. If you can turn lemons into teachable moments, it offers an excellent segue into a discussion on their individual retirement plans.
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