For most high-net-worth couples it’s going to make sense to defer Social Security withdrawals to age 70. However, it’s important to run the numbers in every case and consider Social Security strategy within the context of your client’s investment picture.
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That’s the message from Manish Malhotra, founder, president and CEO of Income Discovery, in a webinar on Advisors4Advisors.com
. Malhotra, who previously was senior vice president at Citigroup Global Wealth Management, discusses ways to optimize Social Security claims in the broader context of retirement income planning.
Malhotra shares several examples of client analyses and reveals details of the new version of Income Discovery analytic software coming out in the first quarter of 2015.
Looking At Lifespans
In the first part of the webinar, Malhotra goes over some Social Security basics and talks about the various factors that advisors need to consider in optimizing Social Security strategy.
Some of the factors to look at include:
- PIA, or Primary Insurance Benefit, the amount due at full retirement age.
- Reduced benefit amount if taken early.
- Increased benefit amount if deferred up to age 70.
- Spousal benefit amounts.
- Affect on spouse of File and Suspend strategy.
- Affect on spouse of taking Restricted Benefits.
After accounting for each of these variables, the software runs scenarios based on different life expectancy numbers for each spouse, based on maximum lifetime benefits and income objectives.
The Broader Picture
The next step is to place the various lifespan results into the broader context of the couple’s overall retirement income strategy. Plug in pension income and investment strategies to generate scenarios showing how likely a certain strategy will produce desired retirement income. The following chart, for instance, lists strategies for "Peter and Lisa" based on their percentile expected lifespan (i.e. what percentage of their peers they may outlive):
“You cannot analyze Social Security strategy in isolation,” Malhotra sums up.
Rating and Comments
Manish’s average rating was 3.7.
“It was okay. I expected it to be a little more in-depth. It mainly covered very basic strategies that are already discussed frequently on the web.”
“The numbers are complicated and it’s difficult to give specific examples via a webinar. A better approach would be to demonstrate the power of the software in conducting scenario analysis. This could be done from a high level to highlight the capabilities of the program without getting too deep in the numbers.”
“Difficult to understand with his accent. Beginning slides good, program less so.”
“I did submit a question but it was never asked. I may have not done it correctly, but the procedure would be nice to know for future webinars.”
“Interested to know anticipated cost of RIA version (of new Income Discovery software).”
“I believe this is the second (possibly third) webinar by Manish in the past few years on A4A, as I recall. The concept he presents is very interesting, which is that SS decisions cannot be made in a vacuum and instead must be integrated with other retirement income sources. This is a very technical approach to solving the mystery of when to take SS, and may be considered a bit of overkill except by the most wonkish advisor. That being said, it was a good presentation and flowed well.”
“Hard to hear, surveys very fast, hard to answer in time frame.”
“One of the least effective. The screen shots were hard to read and as a result the efficacy was lost.”
“He was very hard to follow and understand.”
“I think too much time was spent on examples in the software program.”
“Very helpful and informative. His voice quality could have been better.”
“It contained useful and relevant info.”
“Fairly simplistic. Would have appreciated more explicit use of differing examples using various age spans of spouses.”
“Very good...the application has been improved greatly.”
“Ideally, the speaker would cut deals with Money Tree, MoneyGuide Pro and the other leading planning platforms to integrate his capability directly into planning software.”
“The presenter was a little difficult to understand at times and the screen difficult to see.”
“Hard to understand.”
“Very relevant topic, and so many calculators out there, it’s hard to know which are the best. I look forward to seeing Manish’s product next year.”