Social Security Planning: Don’t Let Your Clients Leave Money On The Table

Since the file and suspend strategy met its demise with The Bipartisan Budget Act of 2015 and the “restricted application“ opportunity has dwindled to almost nothing—again, thanks to The BBA of 2015—many consumers and agents tend to underestimate the Social Security planning strategies that still remain. This underestimation is understood because on the surface Social Security filing seems to have come down to just a timing issue. However, do not mistake the “timing issue“ with ease and simplicity when it comes to helping your clients optimize their Social Security retirement benefits. There is indeed a massive need in helping your clients maximize their Social Security retirement benefits. After all, by consumers making the wrong decisions, it can cost them hundreds of thousands of dollars over their lifetimes.

To demonstrate an example, I will use myself. My dad died at age 62 and his dad died in his late 60s. Cancer runs rampant in the Gipple family. Because of this I probably should not even buy unripened bananas anymore. So, when I ask audiences of consumers when I should file for Social Security retirement benefits, they exclaim, “Age 62!” As many of us know, age 62 is the earliest you can file for SS retirement benefits unless you are a widow or widower. The audience is on the right track because if I were to die at age 63, for example, I would’ve gotten the most money from the Social Security administration by filing at age 62, versus my full retirement age at 67. And certainly by me trying to get the most “delayed retirement credits“ and waiting until age 70 to file, that would seem extremely misguided. However, filing at age 70 is exactly what I am going to do!

Why would I file at age 70 if I believe that I am on the short end of the life expectancy tables? Because, again, there is always more to Social Security than meets the eye. Because I have been the primary breadwinner in the family, my Social Security benefit will be much larger than my wife’s. What that means is, when I pass away—which will certainly be before my wife—she effectively steps into my shoes and inherits the Social Security benefit that I have been receiving. That is her “survivor benefit.“ So, my filing decision is not just about my lifetime, it is also about my spouse’s. That is just one tiny example of how the “timing issue“ is much more complicated than meets the eye.

Another example of the oversimplification of Social Security in the minds of consumers and agents is the fact that many folks believe that the filing ages are “actuarially equivalent“ at life expectancy and it doesn’t really matter when they file.

Before I make a point on this let me step back and explain the options available to the consumer. He/she could generally file for Social Security retirement benefits anytime between age 62 and age 70. Technically, they could file beyond age 70 but the “delayed retirement credits“ only go to age 70. If they file for Social Security at age 62, they get less of a monthly benefit for longer. They get less of a monthly benefit with this strategy because of early filing penalties. However, they get those payments for longer over their lifetime. Another option is they could file for benefits at age 70 and get a higher monthly benefit for a shorter period. The higher monthly benefits are because of the eight percent per year “delayed retirement credits” that the Social Security Administration gives them for delaying their filing. The shorter period is because of the fact that they are closer to their death when they file. And, of course, the client has the option of taking their benefits at any time between age 62 and 70, including their designated “full retirement age.“

Many people believe that all of the age possibilities in which they can file were created to be “actuarially equivalent“ at their life expectancy. It is true that that was the original intent with the way that the early filing penalties and delayed retirement credits were created. However, remember that much of the brackets that determine the benefits were created back in 1983! Have life expectancies changed since then? Absolutely. Furthermore, many of us are either healthier or less healthy than the overall “life expectancy“ that goes into these calculations.

My main point to all of this is, the appropriate time to file for Social Security benefits is specific to each and every one of us. Consumers need your help in finding the optimal time to file and by helping with Social Security planning, you can help your clients capture possibly hundreds of thousands of dollars over their lifetimes that they otherwise would have left on the table.

I have used a couple of very simplified examples above just to demonstrate a point that the Social Security “optimization” opportunities should not be overlooked because of recent legislation. This point is further highlighted once we get into the more complicated items like Social Security taxation, spousal benefits, ex-spousal benefits, widow/widower benefits, staggered filing strategies between both spouses, etc.

Charlie Gipple, CLU, ChFC, is the owner of CG Financial Group, an innovative and full-service independent marketing organization (IMO) that serves independent agents that sell life insurance, annuities and asset-based long term care. He also owns “The Retirement Academy” (www.retirement-academy.com), which is a subscription based online training platform for agents, reps, and company wholesalers.

Gipple is recognized throughout the industry as one of the foremost thought leaders and subject matter experts on annuities, life insurance, long term care, leadership, storyselling and behavioral finance. He is also an industry keynote speaker conducting 100-150 speeches per year. He has spoken at the MDRT Top of the Table as well as other large forums and has also appeared on TheStreet.com and AM Best TV.

Gipple has vast leadership experience in the insurance industry as he has been an executive of various insurance companies and large independent marketing organizations. He is unique in his broad knowledge across the life insurance, annuities and securities businesses. Additionally, within these businesses, he has a deep understanding of the distribution aspects of these products along with the actuarial and hedging aspects. He holds a bachelor’s degree in Finance from the University of Northern Iowa, is FINRA Series 7 and Series 66 licensed and also holds the CLU® and ChFC® designations.

Gipple can be reached by phone at 515-986-3065. Email: cgipple@cgfinancialgroupllc.com.