Addressing Social Security an Important Task for Advisers

Nearly nine in ten (88%) advisers surveyed for a Pension Research Council working paper believed that it was incumbent upon them to educate their clients about how Social Security fit into their retirement finances. Independent financial advisers (93%) were particularly aware of the responsibility to address Social Security with their clients, especially compared to bank representatives (80%).   

Further, most advisers specifically believed they should help their clients decide when to claim Social Security benefits. Wirehouse and regional broker dealers (68% each) were most likely to suggest advising clients about claiming, while life insurance agents (62%) were least likely to feel they should do this.   

The advisers surveyed strongly believed that helping their clients make decisions about their Social Security benefits was an important part of their role. Moreover, for most clients, Social Security benefits made up a significant portion of their incomes in retirement. Three-quarters of advisers (76%) discussed  Social Security with most of their clients, including the 41% who raised this subject with virtually all of their clients (90% to 100%).  

In around half the cases, the advisers tended to bring up Social Security, but many times it was the client who brought up the topic. Advisers generally raised the issue of Social Security to clients around a median age of 55. When clients raised the issue, the discussion started later, at a median age of 60.  

More than three out of five advisers (62%) talked to most of their clients about strategies for maximizing Social Security benefits. That same proportion (62%) said they also addressed the subject of taxation of benefits. Fifty-seven percent explained the Retirement Earnings Test to most clients.   

Fifty-six percent of advisers helped at least three-fifths of their clients estimate their Social Security benefits, but fewer, 46%, advised that proportion of clients about how spousal benefits worked.   

Three of four financial advisers (75%) asserted that they advised clients about claiming Social Security benefits. Independent financial advisers and regional broker dealers were most likely to provide this advice (82% each), while bank representatives (67%) and life insurance agents (63%) were least likely.   

Financial advisers felt they were knowledgeable about Social Security and understood several key details about its benefits. Nearly all advisers (93%) said they were knowledgeable about how Social Security works, with 22% describing themselves as very knowledgeable, and an additional 71% saying they were somewhat knowledgeable. Six percent asserted they were not knowledgeable about Social Security.  

Financial advisers are often critical of the material on Social Security provided to them and their clients: only 26% feel that the material their primary company provides for their clients is useful. Moreover, only 13% agree with the statement that ‘[t]he Social Security Administration does a good job educating financial professionals about how Social Security works’. Fifty-one percent disagree with the statement.   

Although two in three advisers (65%) have visited the basic Social Security website, there is low awareness that Social Security has a website especially for financial planners. Two in five who visited the website rated it excellent or good, but 13% felt it was fair or poor.