The Social Security system may be in serious trouble but, right now, it’s still a critical source of support for clients, according to Theodore Sarenski, president of Blue Ocean Strategies Capital in Syracuse.

Sarenski started with the bad news during his presentation before CPA-planners at the Advanced Personal Financial Planning Conference sponsored by the American Institute of CPAs in Las Vegas.

Reserves for Social Security will be depleted by 2033 and, once they’re gone, incoming receipts will cover just 77% of scheduled benefits, Sarenski says. “It sounds like it’s a long time away, but it’s only 19 years.”

Trouble looms even sooner for the Social Security Disabilty reserves, which will be depleted by 2016, according to Sarenski. And, once depleted, anticipated income would cover just 80% of scheduled benefits, he adds.

For these reasons, Sarenski says, he urges caution.

“We need to be conservative, I think, in our planning,” he says. For people who are age 50 or younger, he is currently projecting they will receive 75% of their benefits.

While he holds out hope that government intervention – possibly in the form of tax increases – can provide a solution, planners still can help their clients get solid benefits from Social Security right now.

This is especially important because baby boomers, now entering their retirement years, have not been good savers, he says.

Across the U.S. workforce today, 51% of people have no private pension coverage and 34% has no retirement savings, he adds.

“So, now that we are all depressed,” he says, “what are the things that we can do for our clients?”

His advice includes the following:

1. WAIT

Although there are exceptions, planners should urge most clients to wait to take their Social Security benefits. If they take them as soon as they can at age 62 rather than waiting until age 66, or even 70, they will receive lower monthly benefits. Planners should remind clients that Social Security is the only benefit with a built-in inflation adjustment.

“You cannot buy an annuity that has an inflation rider so it’s worth waiting” for the higher number, he says.

2. FILE AND SUSPEND 

In some cases, it can make sense to start benefits at age 66 and then immediately suspend them – a strategy many clients are not aware of. For example, a spouse may want to start his benefits and immediately suspend in order to trigger spousal benefits for a wife who is 62 or older. He can then suspend his benefits in order to receive a higher benefit when he resumes them later up to age 70, allowing the benefits to grow by 8% a year. Some people take this route to reduce required minimum distributions from retirement savings.

“The closer [married couples] are in age, the better this works out,” he cautions.

3. MEDICARE B PREMIUM

However, if you do file and suspend, make sure to pay your Medicare Part B premium yourself. If you don’t, Social Security will pay that premium for you, which will reduce future benefits which would otherwise by 8% a year. “Be careful of that,” he says.

4. MARRIAGE

Remember that, in most cases, spouses need to be married for a full year to collect benefits from a spouse’s work record. There are certain exceptions in the instance of disability or death.

5. SPOUSAL BENEFITS 

Both spouses in a couple cannot file and suspend in order to trigger spousal benefits on each other. On the other hand, if they decided to get divorced, they could.

Planners “probably won’t get a lot of clients to do this,” Sarenski jokes.

6. DIVORCE 

A person can collect on their ex-spouse even if their ex-spouse has not begun collecting benefits themselves. Benefits collected by ex-spouses do not impact the benefits due to a client’s family on that client’s work record.

7. REPRESENTATIVE PAYEES

When working with clients who are much older and could lose the ability to care for themselves, those clients should appoint “representative payees” to receive funds on their behalf from the administration. That’s because Social Security does not recognize powers of attorney.

Once, Sasenski says, one of his clients had to close out a banking account that took direct deposits of Social Security checks for herself and her husband. Although she had power of attorney over her husband’s affairs, it took four months of wrangling with the Social Security Administration before she could have her husband’s check sent to her for his benefit.

8. IN-PERSON ENROLLMENT

Remember that, although the Social Security Administration has made a large push to get people to enroll for benefits online, anything beyond the simplest arrangements must be handled in person, at a Social Security office. The online system is not set up to handle anything anomalous.

“Someone told me here at the conference that one of their clients couldn’t apply online. Why? Because they were born on Feb. 29,” Sarenski says, and the system couldn’t recognize that leap year date.

9. ANNUAL STATEMENTS

Planners should urge all their clients to enroll online right now to receive annual Social Security statements. The administration sent out paper statements for the last time in 2010. It waited so long to move the entire operation online to ensure that people could safely and securely access their information online. Now, Sarenski says, the administration’s website is robust. But it’s important that clients check their data regularly because the government does make mistakes occasionally and the older those mistakes are, the harder they are to rectify.

10. NO BENEFITS IN JAIL 

For anyone wondering, Sarenski says, husbands or wives who kill their spouses can’t collect benefits on them. Neither can children who kill their parents. If someone goes to jail, any benefits that would have come due during that jail time are lost.

“But your spouse and children, as long as they are not in there with you, they can continue getting benefits,” he says.

11. COMPASSIONATE ALLOWANCES

In some situations, clients can start receiving benefits very rapidly. “There are 200 compassionate allowances,” he says. “You will get Social Security benefits within two weeks if you have one of those conditions.”

Note: This article has been updated to correct errors in the original version.

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