What All Financial Advisors Should Do (but Don’t): Analyze Your Social Security Benefits
Welcome to the first article in a series on what all financial advisors should do—but don’t. I decided to launch this blog series because finding the right financial advisor to work with can be a challenge. Advisors all seem to say similar things and charge similar fees—so how do you really compare one with the other?
This series breaks down how an advisor worth their fees should be helping you. And if they aren’t doing these things for you, then you should probably look elsewhere.
Today, we’ll start with Social Security benefits.
Your Financial Planner Should Break Down Your Social Security Benefits for You
One of the biggest questions you will ask yourself in your 50s and 60s is “When should I start taking Social Security benefits?”
A second question is “Will any of my other income sources reduce my benefits or get them taxed?”
Your financial plan is incomplete without an answer to those questions. You cannot fully prepare for retirement if you don’t know how much Social Security to expect.
Our Greenwood Village, Colorado financial planning firm works with every client to help them answer these questions. This is no one-size-fits-all approach because every client is unique. And you are unique as well. Your answers to these questions will depend on your specific financial situation and goals.
Let’s start with the age to begin receiving Social Security benefits.
Your Financial Advisor Should Help You Determine the Optimal Age to Take Social Security
You can start receiving reduced Social Security benefits at age 62, your full amount based on your work record at 66-67 (depending on the year you were born), and an increased benefit for every year you postpone up to age 70.
Obviously, having more benefits sounds better, but there are instances, such as early retirement, when starting at age 62 may ultimately benefit your entire financial situation.
Working with us, you would receive a comprehensive analysis of your Social Security statements to accurately evaluate the right age for you to claim benefits. Our analysis would take in your goals, other financial sources like savings or retirement accounts, health and longevity expectations, and spousal benefits.
We would determine what you can expect at each age milestone—but the analysis does not stop there. When it comes to Social Security, you need to know more than just the age at which to retire.
Your Financial Advisor Should Analyze Other Income Sources and Tax Impacts
What happens if you receive a pension? Does it reduce your Social Security benefits? Usually, the answer is no, but not always. If you have a pension, you need to know whether you or your spouse are affected by the Windfall Elimination Provision or the Government Pension Offset.
What if you plan to collect benefits and still work? Will your benefit amount be reduced? In what cases will your Social Security benefits be taxed? And by how much?
The answers to these questions can have a significant financial impact, especially in your retirement years when you are likely on a fixed income. Your financial planner should want you to maximize every dollar in retirement and show you how you can do that. They should help you weigh your options by presenting their potential advantages and disadvantages.
We do a deep-dive analysis for you, analyzing all sources of income and modeling the impact of various decisions, such as the decision to continue working. This means that we really get to know you personally because how else could we help you succeed?
We work with you so you can grasp your financial picture for each of your decision points. In that way, you can make informed and confident choices about your retirement. And that’s our goal: to empower you to achieve the retirement you’ve worked so hard to build.
Your Social Security Benefits Are a Key Part of Your Retirement Plan
Your Social Security benefits shouldn’t be your only income source in retirement, but they will be an important source. You will make many retirement decisions based on the amount of Social Security benefits you can expect and how those benefits integrate into your big picture.
This importance makes it crucial for your financial planner to analyze the interplay of retirement age, goals, finances, longevity expectations, pensions and other income sources, and taxes.
If they don’t do that, then you are paying too much for what you’re getting. Consider looking elsewhere. I recommend a financial advisor who always serves as a fiduciary so that you can be sure they’re giving you advice that is thorough and in your best interests.
Our Greenwood Village, CO fiduciary financial advisory firm offers a complimentary 15-minute call. We can briefly discuss your financial situation and concerns and share how we may be able to help.
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