Tip of the Week

Dealing with the Insecurity of Social Security

The insecurity of Social Security is a significant issue in financial planning, particularly because of the economic effects of the COVID-19 pandemic. Two opposing myths related to Social Security are (1) because Social Security is underfunded, it is best to elect Social Security as early as possible, and (2) Congress will fix the problem before anything happens to the system, assuring that benefits will be untouched going forward.
A suggestion for advisors would be to discuss the insecurity of Social Security with their clients, agree on an approach as to what benefits should be assumed, and document the conversation. This is an important decision that will ultimately affect the client’s long-term retirement income. Determining whether Social Security may experience a benefit decrease is a topic for discussion with the client, not a default to be made by the planner or in planning software.

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