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How Social Security software can maximize client benefits

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Offering clients the best advice on Social Security claiming strategies can be dauntingly complex. Some advisers are using software programs to cut through the confusion and help clients maximize benefits.

The reasons are myriad. For one, the Social Security claiming process has become even more complicated in recent months. The end of the file-and-suspend strategy is perhaps the most fundamental change planners are grappling with. Under this provision, one spouse could file and delay benefits while the other claimed Social Security. This had the effect of significantly boosting total lifetime benefits.

While this loophole is now closed to new filers, there are still dozens of other strategies designed to maximize benefits, most of which can help couples. However, a general lack of knowledge on claiming strategies leads millions of people to make bad decisions on Social Security.

Some 60% take benefits at age 62 — the earliest possible age — even though that move results in permanently lowered monthly benefits.

For example, some 60% take benefits at age 62 — the earliest possible age — even though that move results in permanently lowered monthly benefits.


Even without the availability of file and suspend, planners have to navigate thousands of other rules and factors. There are more than 8,000 strategies and 2,700 separate rules on benefits; this is why advisers should take advantage of specialized software customized to the task.

Here’s one area where the claiming question can still get gnarly: With couples, who should file first and when? As many planners know, anyone gets an 8% annual bonus for waiting to file for benefits between ages 66 and 70.

But total benefits are still gauged to lifetime earnings. Spouses can still claim up to one-half of their spouse’s — or ex-spouse’s (with certain restrictions) — benefits. The best strategy isn’t always clear, and there are a number of ways to approach it.

With yields low and the uncertainty of retirement looming in the minds of Baby Boomers and current retirees, maximizing social security benefits become ever-more important. Unfortunately not all retirees are doing that.
December 4

Although Larry Heller, a planner based in Melville, New York, says that “file and suspend was a big part of our Social Security planning,” he’s found that “spousal analysis is still critical for us.”


Heller uses a program called Savvy Social Security to run a detailed analysis that offers his clients the best possible strategies.

There are more than 8,000 strategies and 2,700 separate rules on benefits.

What should planners know in the context of comprehensive planning that software can break down? As with any other planning element, advisers should look at life expectancy, lifetime total benefits, retirement spending levels/cash flow, other savings, pensions and the impact of inflation.

With Social Security, planners should also understand benefit reductions due to offsets such as being a public employee, and which benefit levels are available given earnings records and the age when the benefit is claimed.

Generating a customized report that offers a number of options, Heller notes, is essential when using any software. It also offers clients another frame of reference, he says: “It allows them to see Social Security as an asset.”

With the growing prevalence of defined-contribution plans such as 401(k)s, Social Security has become even more important. Unlike defined-contribution plans, the government program provides an inflation-indexed income stream that can grow (in monthly payments) from age 62 to 70. So making the right timing decision — in harmony with other retirement fund withdrawals — is critical.


So making the right timing decision — in harmony with other retirement fund withdrawals — is critical.

Unlike the difficult-to-navigate Social Security site, most planner oriented-packages provide numerous scenarios for clients.

Wes Shannon, a planner with SJK Financial Planning in Hurst, Texas, uses Social Security Analyzer to help clients with tax optimization and assessing the best age to file for benefits.

Like many planners, Shannon previously struggled with manual input and cumbersome spreadsheets. The program he now uses not only generates multiple scenarios, but also produces graphics he can show clients while working through some complex problems.

“I had a 70-year-old client liquidating an IRA and annuity,” Shannon recalls. “I needed to know which account to take withdrawals from, and a Social Security strategy. That used to take me a whole day to calculate.”

Another key utility in the new generation of Social Security software is breakeven analysis — that is, the time period it will take to justify delaying taking Social Security. The government’s tools have had some problems with this function. A few years ago, the Social Security site’s breakeven calculator was pulled because it gave misleading results.

Using current private Social Security software packages, however, planners can give a more precise picture.

“We used Excel at first for breakeven analysis,” says Ed Jastrem, a planner with Heritage Financial in Westwood, Mass. “We wanted to know whether clients should file at normal retirement age [66 for most Americans] or delay. We used Social Security Income Planner to help us with complex strategies.”

Ideally, all software should also go deep in answering questions about how Roth IRA withdrawals, minimum required IRA distributions and portfolio allocations mesh with Social Security decisions.

When evaluating a package, advisers should also vet customer support: Can you call someone to answer a technical question? What if you need training?

There’s also the ongoing concern about ease of use. If a planner is spending lots of time trying to find the best way to input data or to run customized analyses, that’s a key consideration. Good graphic displays also can help planners explain strategies to clients.

These programs should evolve with the times. Shannon notes that the programs will continue to “add more value to our services.”

This value-add will not only help clients boost their retirement income, it will also help advisers who are constantly trying to keep up with the ever-changing retirement-planning scene.

Maximize My Social Security: An all-purpose calculator, although not specifically targeted to planners, offered by economist Laurence Kotlikoff, also the author of the Social Security guide "Get What’s Yours."

Social Security Rules: For more background on changes in claiming strategies, the Social Security Administration has set up a page for planners.

Social Security Timing: Another claiming strategy program designed for advisers.

Editor's note: The author has not personally evaluated any of the above programs and makes no claims about their efficacy. He has no interest in any company or program.

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