Tutorial of Social Security Timing

See a Social Security Timing software demonstration.

Social Security Timing | demo | Q2 2021

 

Adding a New Client 

 

1. To add a new client in Social Security Timing, select the green Social Security Timing button. 

 

2. Select either "Import" or Manual" data entry.

3. If you select manual, add the client's marital status and name. Click "Start".

4. Add the client's date-of-birth and life expectancy, and click "Next."

5. At the top of the screen you can indicate how you'd like to input the client's Social Security earnings: quick entry, specified entry, or historical earnings. When working with a married couple, you'll enter the data for each spouse. 

Tip: Obtaining the client's Social Security statement allows you to create a report using a benefit estimate, a specified election entry or the historical data entry. The historical earnings give you the most accurate result as it allows you to strip out any assumptions that the Social Security Administration uses to generate their benefit estimates.

 

In 2021, the Social Security Administration changed the format of the Social Security statement to provide workers with the most pertinent information to help them make the best decision about when to file for their retirement benefit.  The historical earnings are now listed page 2 of the statements and have been condensed, rather than page 3. Some of the earlier years have been combined or grouped together as an estimate for a period of years. See an example below: 

Table

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Note: You can only locate the entire earnings history by logging into your Social Security account. Once you're logged in go to the section titled “Eligibility and Earnings”, click “Review your full earnings record now”. 

Benefit Cuts 

Social Security Timing also allows you to illustrate the impact of benefit cuts in the event that Social Security becomes insolvent. We allow you to enter in a benefit cut start year, and the percentage of cuts. The default is based on the Social Security Administration's Trustees Report. 

Income

Now let's move to the client's incomes. Social Security Timing also allows you to take into consideration the impacts of the Windfall Elimination Provision (WEP), Government Pension Offset (GPO), and the earnings test by entering in the client's non-covered pension and expected work history. It's important to note that you must enter in historical earnings in a non-covered pension in order to trigger the WEP and GPO calculations. It's only necessary to enter in the earned income to trigger the earnings test. In our example, only John is going to continue to work.

Assumptions

Now, let's move on to assumptions. The inflation rate will act as your cost of living adjustment while projecting forward on other benefit formula calculations. The discount rate is used as present value of future value payments to compare strategies appropriately. Finally, we will review our client's income needs. Make sure to enter in the income need for your client as it allows you to illustrate the difference between what Social Security will provide and the client's income need. That's it. You can create a personalized Social Security case in under 10 minutes. Let's go ahead and take a look at the results. 

Social Security Timing Charts and Graphs

Once you've entered in all of the relevant Social Security Timing data, simply click on the Social Security Timing tab in the upper right-hand corner. You'll notice the difference between our suggested strategy and our earliest strategy is $97,583. In the strategy comparison chart, the suggested strategy is blue and the earliest is red. If you click on the suggested bar, you can view the detailed strategy instructions, which outline when the client should file for benefits, what age they will start, and when they can get their first check.

Below the instructions, we will see an estimated versus desired income chart. This chart can help the client visually see the overall income gap between their need and Social Security. This is a great way to help transition to an overall retirement income distribution plan. Even further down, you can review the annual or monthly cash flows.

To the right of the strategy comparison chart you can view the breakeven chart. This chart allows you to address longevity concerns by showing which strategy in the customized comparison provides the best outcome at all life expectancy combinations. Essentially the breakeven here is where the blue and the red meet.

One of the most important features of Social Security Timing is just below the initial charts, creating personalized strategies. After you take into consideration the client's other assets, oftentimes it makes sense to consider strategies that fit the client's overall income distribution plan. We allow you to create a strategy using age selection, enter specific ages, and using common strategies. For example, you can select common alternatives and widest split. This is a strategy that allows you to have cash flows hitting the household right away while preserving the highest widow's benefit for the surviving spouse. If you were to choose to add this to your strategy comparison and the breakeven chart, you'd simply select make alternative one or two. And finally you can toggle between the strategies with full benefit payments and the benefit cut calculations as well. When you're ready, select generate PDF to create a client report for your client or prospective client.

If you have any questions about this case or about Social Security Timing in general, please contact our customer experience team at help@covisum.com or (877) 844-7213.