Engage Prospects with Social Security Strategies
November 17, 2016
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Key Takeaways
- Social Security is a powerful prospecting topic. Prospects approaching or in retirement are highly motivated to understand their options, and a personalized strategy conversation can be a strong way to engage and convert new clients.
- Claiming strategy can have major financial stakes. While the most common claiming age is now 66, roughly 1 in 4 retirees still claim at 62—the earliest age possible—potentially leaving money on the table. In one example, waiting until 70 instead of claiming at 62 meant nearly $668,000 more in lifetime benefits.
- Visuals make a complex topic approachable. RightCapital allows advisors to illustrate "claim early" versus "wait until 70" scenarios and pinpoint a client's breakeven age, turning a confusing decision into a clear, motivating conversation.
Do you feel comfortable talking with your prospects about Social Security? Do you avoid going deeper with clients in conversations about Social Security because you find it difficult to illustrate potential outcomes in a way that motivates them to act? What if you could provide prospects with an interactive tool to show the impact different Social Security scenarios would have on their Retirement success?
Social Security Benefit Basics
Social Security benefits have three key components: retirement benefit, spousal benefit and survivor benefit. The table below provides a good summary of some key components of Social Security strategies.
Factor | Retirement | Spousal | Survivor |
|---|---|---|---|
Eligibility Age | 62 | 62 | 60 |
Full RetirementAge | 65 to 67 | Same as Retirement | 66 |
Primary Insurance Amount | PIA | 50% of spouse's PIA | Max (82.5% of deceased PIA, monthly retirement income) |
Early WithdrawalPenalty | 5.0% to 6.7% per year | 5.0% to 6.7% per year | 4.0% to 6.0% per year |
Delayed RetirementCredit | 7.5% to 8% per year | None | None |
This prospect leaves $667,750 on the table with a sub-optimal strategy
70% of eligible retirees claim their Social Security when they are first eligible to do so – running the risk that they are leaving money on the table.
As an example, we looked at Mike and Amanda Brady, 56 and 54 respectively, who each plan to retire at age 65. The assumed life expectancy are 90 for both of them. They have accumulated retirement assets of $ 1.5 million in tax deferred vehicles and $100,000 in taxable investments.
The table below compares three different strategies: both claim as early as possible at age 62, wait until Full Retirement Age, and delay claiming until each reaches age 70. In this example, the couple would get $667,750 more Social Security if they wait until age 70 versus a strategy of claiming it early at age 62.
Scenario | Total benefit | Difference |
|---|---|---|
Take as early as possible at age 62 | $2,384,201 | |
Wait until full retirement age | $2,718,649 | +$334,448 |
Wait until age 70 | $3,051,951 | +$667,750 |
Illustrate Social Security strategies in an intuitive way
Many advisors have more success converting prospects when they can illustrate a personalized Social Security strategy in an intuitive way. Here is how an advisor can use the RightCapital tool to show a prospective client the impact of a “start early” versus a “wait to age 70” Social Security claiming strategy.
 "Graph showing comparison between \"wait to 70\" and \"Start early\"")
A very important variable to consider is the life expectancy of the client. Advisors use personalized charts like this generated by RightCapital to show their “breakeven” point is age 79. If client expects to live longer, waiting to claim Social Security benefits until age 70 clearly provides added benefit.
 "Chart showing annual cash flow comparison depending on age starting Social Security")
Engage prospects by changing the conversations
Many advisors are having success capturing new clients by engaging prospects in a Social Security optimization discussion. If you are not already, you should plan to incorporate this into your practice.
The complexity of the topic has made it difficult for many advisors to effectively deliver the message to their clients and/or prospects. Spend a few minutes on the phone with us and we will show you how the RightCapital tool can make those conversations much easier. The RightCapital tool is intuitive and interactive, allowing you to begin Social Security optimization conversations as soon as plans are created.
Prospects approaching retirement or already retired are highly motivated to learn how they could benefit from a personalized Social Security optimization strategy. This approach can also help you to augment your AUM thus increasing your revenue.
Frequently asked questions
Social Security includes three key benefit types: the retirement benefit (based on a person's own earnings record), the spousal benefit (up to 50% of a spouse's primary insurance amount), and the survivor benefit (paid to a surviving spouse). Each has different eligibility ages and rules.
The breakeven age is the point at which the total benefits from delaying claiming surpass the total from claiming early. If a client expects to live beyond their breakeven age, waiting to claim generally provides more lifetime benefit.
RightCapital allows advisors to model and compare different claiming strategies, illustrate the lifetime impact of claiming early versus delaying, and pinpoint a client's breakeven age, all through clear, interactive visuals that make Social Security conversations easy to start as soon as a plan is created.
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