The Harsh Reality: Why Social Security Planning is Crucial to Your Clients’ Retirement

Posted By on Jun 13, 2013|0 comments

During the Great Depression, the Social Security Administration was created to help the elderly in retirement. Like in the 1930s, few people today are prepared for the realities of post-career living. In the article The Biggest Retirement Myth Ever Told, Morgan Housel bluntly states: “We have a retirement problem. A very serious one that shouldn’t be discounted.” As a financial advisor, you play an integral role in helping individuals feel confident during the retirement process and prepared for the lifestyle changes that the new phase in life brings.

Positive Progress

The average monthly Social Security benefit over the last 70 years. Backing up a bit, let’s consider the positives of Social Security today as there have been improvements in retirement benefits since Social Security was first implemented in the 1930s. Social Security disbursements have grown, a higher percentage of individuals have some sort of pension income, and people’s quality of life (as measured by longevity) has improved.

The first social Security check in America was cashed in 1940 for $22.54, which is $374 in today’s dollars. Today, the average Social Security check is three times that amount, or $1,277.

In addition to Social Security benefits, more people are seeing the benefits of pension than ever before. While pension seems like a golden ideal from the “good ole days,” its benefits in this day-and-age are real. Nevin Adams of the Employee Benefit Research Institute provides an insight into today’s reality:  “Only a quarter of those age 65 or older had pension income in 1975 … The highest level ever was the early 1990s, when fewer than 4 in 10 (both public- and private-sector workers) reported pension income.” Essentially, nearly 40% of the population had pensions in the 1990s. Adams provides further clarity by saying that in 1975, 15% of all income reported by those 65 and older came from pensions. By 2010, this number increased to 20%.

Despite these advancements, Americans are not as equipped for retirement as they could be. Some argue that although retirees have higher incomes and more savings today, they have no upper hand, because they have to finance a longer retirement. The reality is that we are living longer, which is a perk of course, but when it comes to enjoying retirement, longevity can mean fewer dollars to enjoy each year.

According to Centers for Disease Control’s actuary tables, someone born in 1950 could expect to live to age 68.2, while someone born in 2010 could expect to live to 78.7. A person who reached the age of 65 in 1950 could expect to live 14 more years, while a 65-year-old in 2010 could expect to live 19 more years, representing an increase of five years.

Retirement Income Shortfalls

Only 58% of the population is saving for retirement. While there has been progress in pension and Social Security, improvements in quality of life may only be on paper.  The state of retirement preparedness is weak.  This may be due to lower savings rates, the rise in the cost of health insurance, and/or the rise in the cost of college tuition and the number of parents forking over money for their children’s education.

No matter what the reason, future retirees need to understand the facts and learn how to properly save.  According to ConvergEx Group, only 58% of the population is saving for retirement.  Of that group, 60% have less than $25,000 put away.

More shockingly, research conducted by Nielsen Claritas specifies that Americans ages 55-64 have a median net worth of $180,000. As a result of this low value, the reliance on Social Security is significant.

How You Can Help Your Clients Prepare for Retirement

With the dependence on Social Security at high levels, it is no wonder why citizens are so adamant about preserving the benefits. Touching Social Security or talk of changing Social Security benefits is considered a third-rail subject and could mean instant career death for a politician who even mutters changing the benefits.

Most individuals start taking Social Security benefits as soon as possible. While you might not be able to help your clients defer payments, as a financial advisor, you can help individuals understand how elements of Social Security can be used in different ways to maximize the benefits received. You can also add countless other insights to help your clients plan for retirement.

It is clear that people are under-prepared for retirement.  This emphasizes the value of you as a financial advisor—you can enhance your client relationships by providing retirement planning, and more specifically, guidance about how to maximize Social Security benefits.

Next Steps

Sign up for our Social Security webinar and learn how to provide insights to your clients. Then, check back for a future post about Social Security benefits, the suggested changes by President Obama, and the derived implications. With so many people reliant on Social Security benefits, accurate guidance from financial advisors is crucial.


  1. Are Your Clients Ready for 3.3% Less in Social Security Benefits? | AUM in a Box - [...] a previous entry, we discussed how many individuals are not financially prepared for retirement.  In “Seniors would see smaller…

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