Beginning Social Security Benefits

More and more people are interested in the right time to begin Social Security benefits, and we’ve been leaders at Retirement Watch informing people how to make that decision. You can obtain a copy of my report on the subject on the web site. Yet, many financial advisors still aren’t well-versed in the details of taking SS benefits. The key for many people is to coordinate the benefits of both spouses in a married couple. A survey by the Wharton School’s Pension Research Council found that many advisors don’t take into account the other spouse when advising one spouse on when to take benefits. Specifically, it found that advisers didn’t consider the higher survivor’s benefit a widow would receive after her husband passed away if the husband waited until age 70 to begin taking retirement benefits. The survey and reports about it seem to paint this is sex discrimination and widows being cheated out of what they should have had. But I think it’s more a factor of people not being full aware of all the complications of the benefits decision, and there’s not a lot of incentive for most financial advisors to become experts in SS benefits.

The study, which posed questions about a number of specific scenarios to a group of about 400 professional financial advisers, suggests that many are tailoring their advice to the needs of the husband without thinking as carefully about the impact on the wife.

For instance, presented with a 62-year-old man in average health who wants to retire right away but has, together with his wife, saved $800,000, only one in five advisers suggested he put off taking Social Security as long as possible. The recommendations were made despite the fact that with such a large nest egg, the couple appeared to face little immediate need for cash and the decision would significantly crimp the woman’s survivor benefit should she become a widow.