Social Security retirement income planning is vital for retired clients or clients nearing retirement, serving as a supplemental source of income that can provide numerous benefits. Whether your clients file as individuals or jointly, claiming Social Security benefits can be a complicated process, possibly significantly impacting their retirement income plan.

Here’s where you play an essential role: helping your clients understand different scenarios and claiming strategies they may not know about.


Why Is Social Security Retirement Income Planning So Crucial?

Why should your clients start planning for Social Security right away? There are a few reasons to consider:

  • Age: If your clients are over 55, it might be time to start talking about Social Security optimization.
  • Marital status: Optimizing a Social Security strategy can be more complex for married couples. Calculations surrounding taxes must include the age of both spouses at retirement, and the income used to claim their Social Security benefits and their retirement investments.


Questions to Consider For Social Security Retirement Income Planning

Let’s look at some critical income-related questions your clients must consider when planning Social Security benefits.

Q: Do both spouses claim separate incomes or just the higher-earning spouse’s income if filing jointly?

A: If your married clients’ household had one top-earning individual representing the majority of the income throughout the couple’s working years, the spouse of the principal earner qualifies to claim spousal benefits equal to half of what the top earner is eligible for. However, the top earner must be at retirement age.

Q: What if a household has two working spouses who earned similar incomes? Should the lower earner claim their own income?

A: Instead of claiming spousal benefits, the lower-earning spouse may qualify for more Social Security benefits if they claim their own income.

Q: What sources of income should be considered in Social Security retirement income planning, and how do they affect timing?

A: Factoring other sources of income such as retirement accounts, traditional IRAs, pensions, and more is imperative when clients are planning for Social Security benefits. The tax implications of these sources of income must be factored in when planning withdrawals to avoid unnecessary taxes. It may be helpful to advise clients to delay claiming benefits as long as they can. Even if your clients can’t wait until age 70 to begin claiming, delaying a few extra years can increase the value of their benefits once they’re claimed.

Q: How can proactive Social Security retirement income planning affect tax rates?

A: Proactive Social Security retirement income planning can help clients avoid paying unexpected taxes on Social Security when it’s time to take required minimum distributions (RMDs). Combining Roth IRA withdrawals with Social Security benefits can lower the tax burden more than stacking Social Security and traditional IRA withdrawals.


Highlight Your Value as a Financial Advisor

Advisors can use Covisum’s retirement income planning software to explain the many intricacies of Social Security planning with ease.

Social Security Timing® offers many advantages to financial advisors, such as:

  • Instant client reports
  • Showcasing alternate claiming strategies and their financial impact for the client
  • Break-even charts for both married and single clients
  • Benefit cut scenarios to show clients how potential legislative changes could influence their retirement income strategy

Tax Clarity® helps financial advisors identify sub-optimal tax situations for clients, along with the following features:

  • Deep insights into unseen opportunities that can add significant value to a retirement strategy
  • Determines the impact of Roth conversions or the harvesting of capital gains and explores the tax consequences of those decisions
  • Calculates client's effective marginal tax rate and identifies risky points where income can push clients into much higher effective marginal tax rates
  • Provides Tax Maps that compare different withdrawal strategies on-screen and saves the results to show your clients

Get even more information about how to help your clients with retirement income planning — including Social Security retirement income planning — while truly highlighting your value as a financial advisor. Sign up now for our weekly on-demand webinar, FinTech Tuesday.