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Do Your Clients Really Need Social Security?

There has been a lot of fuss and discussion about the possibility of changes to Social Security benefits, ranging from a mere reduction in the rate of increase to pushing retirement age further out to actual cuts in the benefits themselves. This should lead advisers – and their clients – to ask what should be done about the possibilities.

A good starting point for discussion is asking to what extent a particular person will be dependent on Social Security benefits. Are there enough client resources, including liquid investments, pensions, expected savings or inheritances, or other assets, to fund the desired level of spending in retirement? If so, then this fortunate client will not be dependent on the benefits. What is ultimately received from Social Security would then be akin to the icing on the retirement cake.

When it is clear that at least some level of benefits will be necessary for a client to have sufficient confidence in attaining their retirement goals, then the next step is to get a good feel for the amount that will be required. A review of the client’s financial plan, factoring in different levels of benefits, should prove a guide to what will be needed. If the anticipated benefit amount is less than the amount projected by Social Security today, that knowledge will be helpful. The greater the difference between the need and the expected payment the better off your client will be.

This exercise with your client, or performed for yourself, is a good way to understand the role of Social Security in the financial plan. It gets one to thinking about their options, about what they can do today if they believe there will be adverse changes in Social Security and about making realistic decisions to handle the issue. In a way, going through this process and taking action is a bit like getting insurance against possible future problems. When there may be a bad outcome with financial costs, having that insurance is good protection.

Take a look at the role Social Security is to play in your financial plan and then take whatever steps you need to take to protect yourself. 

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