Why Social Security optimization planning matters

The age at which clients start claiming Social Security can have a huge impact on the size of their benefit. Clients can file as early as age 62, but they would receive a reduced monthly benefit compared with the amount they’d receive at full retirement age. Or they could delay filing up to age 70 to increase their monthly benefit by as much as 80%.1

A guaranteed income floor

Social Security benefits are guaranteed income, so they provide an income floor in retirement. Benefits replace, by many estimates, about 30% to 40%2 of a retiree’s pre-retirement income from wages, with the remaining 60% to 70% of their monthly “paycheck” often coming from savings.
Chart illustrating sources of retirement income

Unique benefits of Social Security

By itself, Social Security would be a powerful asset in a portfolio, and it offers features that other sources of income typically do not, including:

  • Guaranteed income for life: Social Security benefits are paid until the recipient passes away
  • Annual inflation increases: Cost-of-living adjustments help recipients keep up with prices over time
  • Survivor benefits: A widowed spouse can collect a benefit that is based on their spouse’s benefit
  • Preferential tax treatment: A portion of Social Security income will always be tax free

The risk of benefit cuts

When your clients ask whether Social Security is going broke or question whether they’ll live long enough to break even if they delay when they file for benefits, you can help them make informed decisions.

Discuss solvency with your clients

With no changes, Social Security can pay full benefits until 2033 and 77% of benefits through 20973 — far from going broke. Congress continues to discuss proposals that address the funding shortfalls.

Whether it’s due to a concern about solvency or for some other reason, about half of all new filers file for benefits prior to full retirement age, locking in reduced benefits for life.4 So, while it is good for you to help clients prepare for the worst case, you can help dispel many solvency risks and help your clients get the most out of their potential Social Security benefit.

Why turn to Nationwide as a trusted resource?

Our credentialed Social Security specialists have decades of planning experience. We are here to support you and your clients on this topic.

Additionally, more than 10 years ago, the Nationwide Retirement Institute® began partnering with The Harris Poll to survey Americans about their knowledge of and concerns regarding Social Security retirement benefits. Today, our annual survey results deliver timely and relevant insights to strengthen your Social Security conversations with clients.

View survey results
Keep these insights in mind as you consider:

How current events affect Social Security claiming decisions

Client knowledge gaps and misunderstandings that hinder the ability to maximize benefits

Strategies for integrating Social Security benefits into an overall retirement income plan

Check out our videos

Learn how Nationwide can help you more confidently answer your clients when they ask: “When should I file for benefits?”

Review videos
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Social Security 360 Analyzer®

Start Social Security planning by offering clients a personalized review and assessment.

The Nationwide Social Security 360 Analyzer® tool identifies optimal filing strategies, generates custom client-ready reports to help guide conversations, and strengthens your planning conversations by providing break-even and cash flow analyses.

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For more information about Social Security, view our many resources.

[1] This figure is based on an individual with full retirement age of 67; it compares early filing at age 62 and receiving reduced benefits of 71% of the primary insurance amount versus delayed filing at age 70 and receiving credits to increase benefits by 25% over and above the primary insurance amount.

[2] https://www.cbpp.org/sites/default/files/atoms/files/8-8-16socsec.pdf

[3] "The 2020 Annual Report of the Board of Trustees of the Federal Old-Age and Survivors Insurance and Federal Disability Insurance Trust Funds," Social Security Administration (April 2020).

[4] If the divorce was within the past 2 years, your client’s ex-spouse must have filed for benefits. If the divorce occurred more than 2 years ago, there’s no requirement for the ex-spouse to have filed.