When Should I File for Social Security? Answer This Client Question with A Handful of Your Own

Chances are that you have been presented with the when-should-I-start question by a client or prospect on more than one occasion. If you are subscribing to the “run and hide under your desk” or “go ask your CPA, attorney, clergy…” approach, you’re missing a prime opportunity.

The fact that roughly 37% of men and 42% of women, age 65 or older, rely on Social Security for more than half of their retirement income is sobering enough.1 Social Security was never intended to replace more than 40% of the average retiree’s pre-retirement income.

Given the importance of Social Security for countless retirees, you’ve got your work cut out for you in many ways. You’re called upon to help your clients navigate a major life transition, often with scant assets—assets that might have to stretch over a time horizon longer than anticipated, possibly with unexpected risks emerging. You may have uncomfortable conversations about whether retiring now is possible or should be delayed to avoid near disaster in the years ahead.

Such conversations can be tricky. Nevertheless, as a financial professional, you are in an appealing position. Helping guide pre-retirees in a thoughtful and meaningful way carries its weight in gold. Urging difficult conversations to occur sooner rather than later can produce a retirement that can better hurdle the potential roadblocks along the way.

As the title of this article indicates, individuals and couples navigating the transition from working to retirement frequently pose the “when should I file for Social Security?” question. Don’t run from it! And don’t adopt rules of thumb, either. That’s where you lose credibility and forfeit opportunities.

Instead, respond by asking the five pivotal questions revealed below. Then thoughtfully listen to your clients’ answers, allowing them to become part of their own strategic solution. Educate them about their options rather than allowing them to rely upon misinformation, fear of Social Security’s potential insolvency, or what their neighbor said they should do. My mantra has always remained the same— empowered clients make happy clients.

Introduce Accurate Information About Insolvency

Before getting into the five conversation-starting questions, it’s important to touch on Social Security’s financial status. Will retirement benefits run dry? No, that won’t happen, just as it hasn’t happened in years past when the trust funds were on the brink of depletion.

In fact, the 2022 report from Social Security’s OASDI Board of Trustees, released June 2, 2022, is the same old story, even with the pandemic factored in. Short-term, there has been a slight improvement over last year’s version given the effects of COVID-19, with OASDI (Old-Age, Survivor, Disability Income) reserves expected to cover full benefits through 2035 rather than 2034.³

Long-term, Washington must act if full benefits are to be maintained beyond the mid-2030s. Even without such help, though, ongoing payroll taxes can support 80% of promised benefits, which is much better than the 0% some people fear.

Bottom line: Acknowledge client concerns about Social Security but navigate the conversation with what-if planning scenarios. Don’t let scare headlines be the sole reason your clients file early for Social Security, sacrificing the increased cash flow that comes from waiting. Instead, use the following five questions as the backbone of a claim-timing decision.

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