Don’t let Social Security fears hurt planning efforts

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Economists and politicians have offered dire predictions about Social Security for decades, and the results of this year’s presidential election have generated more anxiety and confusion about the program’s future.

“Almost every client we have who is nearing retirement asks us for reassurance about the stability of Social Security,” says Lauren Locker, a CFP and principal of Locker Financial Services in Little Falls, New Jersey.

When nervous older clients express worries about Social Security, she stresses how deeply the system is embedded in our country’s social fabric.

After all, Social Security has been the primary source of retirement income for the past eight decades, Locker tells them.

“The longevity is there for a reason,” she says.

Without Social Security, more than 40% of Americans 65 and older would be living below the poverty line, so significant cuts would “create societal chaos,” Locker says.

And in an era in which the largest percentage of people in history are living past 65, with some 10,000 Americans a day hitting that age, she says that politicians are keenly aware of the political clout of the elderly, making sweeping changes unlikely.

That isn’t to say that there won’t be any changes at all, however.

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Like many other observers, Locker says she thinks that there may be a further roll-back of the retirement age, higher payroll taxes, and possibly changes in how the highest earners pay for and receive benefits, perhaps including means testing.

“The government, in essence, has given IOUs, and the government will either raise taxes to pay for them or float additional debt,” says Anthony Ogorek, a CFP and the chief investment officer and founder of Ogorek Wealth Management in Williamsville, New York. “One way or another, they’re going to make good on them.”

Still, not all of Ogorek’s clients nearing retirement share his confidence.

Over the past few years, a handful of his clients have wanted to take their benefits at 66 rather than at 70 only because of their distrust of the system. In some cases, their skepticism was fueled by the government’s elimination of the suspend-and-file rule this year.

“Their position was, ‘If I’m taking the benefits now, I know they can’t take them away from me,’” Ogorek says. “So essentially, they’ve foregone a 32% guaranteed increase in benefits based on their fear that the government will somehow take this benefit away from them.”

Ogorek says that he has had success in easing clients’ fears by encouraging them to focus on their personal financial situations and to filter out politics.

Waiting to claim increased benefits presents an excellent opportunity that can’t really be found elsewhere while returns and yields are this low, he tells them.

Over the past two or three years, Ogorek estimates that he has been able to convince up to three-quarters of his clients who don’t immediately need the money to delay their claims.

Some will take it one year at a time, he says.

“Even if they delay it by two years, we’ve achieved a 16% increase in the payout over their lifetime, which is substantial,” Ogorek says.

This story is part of a 30-30 series on Social Security.

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