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When clients count on Social Security

Since retirement and Social Security go hand in hand, your clients may be counting on their benefit checks to provide them with significant income when they retire. Unfortunately, not everyone qualifies for benefits, and for those who do qualify, Social Security may not provide as much income as they expect. It is never too early to have a conversation about Social Security to help give clients a realistic idea of what to expect from this important source of retirement income.

Qualifying for benefits

Social Security provides a base retirement income for about of all workers. In other words, most of your clients can count on receiving Social Security benefits. So, who makes up the other 5 percent? Typically, clients who have worked for the government (city, state or federal), railroads or public schools should look into whether they are covered. If their employer does not require them to pay Social Security taxes and provides them with a pension, they may find their Social Security benefits are reduced or even eliminated.

The Windfall Elimination Provision

Reduces benefits for retirees who are entitled to a pension from a job that was not covered by Social Security and who also have Social Security benefits based on fewer than 30 years of covered earnings. (The reduction doesn鈥檛 apply to those with at least 30 years of covered employment.) Although the WEP reduction affects retirees and eligible dependents, it does not affect survivor benefits.

The Government Pension Offset ()

Reduces the benefits of a spouse or surviving spouse of most workers who receive a pension from government employment that was not covered by Social Security.

Of course, some people work and pay Social Security taxes but never reach 鈥� in other words, they do not earn the required 40 credits over ten years of work. Some individuals in this situation qualify for disability benefits and others (although not everyone) may find they are eligible for benefits on a family member鈥檚 or ex-spouse鈥檚 earnings record.

Considering the full retirement picture

. However, clients who expect to receive Social Security benefits should not count on Social Security to replace the full amount of their previous income. Although, these benefits can provide a base for a client鈥檚 retirement income. 

Consider these for individuals aged 65 and older:

• Social Security makes up about 30 percent of retirement income for individuals over age 65.
• Among Social Security beneficiaries aged 65 and over, 37 percent of men and 42 percent of women receive 50 percent or more of their income from Social Security.
• Among people aged 65 and over receiving Social Security benefits, 12 percent of men and 15 percent of women rely on Social Security for 90 percent or more of their retirement income. 

Many people today help supplement Social Security benefits with income drawn from:

• Savings and investments (including qualified retirement plans and IRAs)
• A pension (for those who have one)
• Annuities (which can convert a portion of savings into a guaranteed income stream a retiree can鈥檛 outlive)

Looking to the future

Clients who are counting on Social Security for retirement need a realistic idea of how much their benefit might be and how much additional income they will need to help cover their anticipated retirement expenses. A comprehensive retirement planning discussion is a good place to begin identifying and addressing any apparent gap between income and expenses. There are many unknowns, of course 鈥� inflation, health care expenses, the overall economy and even the number of years the client will spend in retirement 鈥� but thoughtful planning helps put clients in the best position to thrive during retirement and adapt to changes as necessary. An annuity may be the right fit for clients who need to help fill that income gap as they plan for future expenses.

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Not affiliated with or endorsed by the Social Security Administration or any governmental agency. 
This material contains educational information regarding the Social Security program and is not intended to promote any product or service offered by 麻豆传媒. The information represents a general understanding of the Social Security Program, is subject to change, and should not be considered Social Security, tax or legal advice. Consult a tax or legal professional before making any decision.