Clients Waiting Until 70 to Claim Social Security? 3 Bits of Friendly Advice

Overall, financial advisors have done an excellent job helping clients maximize their Social Security benefits by waiting until 70 to claim. While not every client can — or is willing to — wait that long, it is an effective strategy. 

As clients near age 70 and are ready to claim benefits, you may find these practical bits of advice helpful for you to connect the often forgotten dots.

Tip 1: Set expectations for how and when to apply for benefits.

The most common questions are around how and when to claim. Best option is to apply online at SSA.gov. Most find the application easy to fill out. It takes 5 to 10 minutes if clients already have their my Social Security account set up.

They should apply one to two months before their 70th birthday month. Importantly, they should make a note in the “Remarks” box on the application that they want benefits to start at age 70 to receive their maximum.

Connect these dots for your clients:

• By starting their benefit, any applicable spousal benefits or spousal top-up should also start. Advise the client to check on this additional payment and call the local SSA office if payments didn’t begin.
• The client may get a call from the local SSA office asking if they want a 6-month retroactive lump-sum payment. It is tempting, but not advisable.
• The SSA may request a client to come into the office after an application has been received. It may simply be for an identification check. They should attend the appointment and bring any required documents.

Remind clients there is a tremendous amount of scamming going on toward seniors. Social Security communicates via regular USPS mail or puts information behind the login. Clients should read everything that comes in the mail and save all communications. 

Tip 2: Share critical information for clients who are still working.

For clients who continued to work and remained in their large employer group health plan, make the Social Security to Medicare Part A connection clear.

Starting Social Security any time after age 65 kickstarts a 6-month retroactive period (but starts no earlier than their 65th birthday month). Unbeknownst to clients, Medicare Part A hospitalization insurance automatically comes connected to Social Security benefits. However, Part A started behind the scenes six months prior to the application date. 

That means Part A started seven or eight months prior to turning 70.

There is nothing a client needs to do about this retroactive starting date unless they have been contributing to a health savings account. In that case, you should advise them to stop contributions and inform their employer about nine months before reaching 70.

Tip #3: Set expectations for smaller benefit payments.

Clients who have waited until 70 to claim know how significant their benefit payment will be. Instead of, say, $3,000 per month, they may instead get about $4,000 per month between delayed retirement credits and COLAs. But that’s only on paper.

Depending on each client’s overall financial picture, there can be reductions for:

• Medicare Part B premiums. Once both Social Security and Part B are turned on, Part B premiums are automatically deducted from Social Security before arriving in their bank account. The same goes for the income-related monthly adjustment amount (IRMAA) if your client’s income is high enough.
• WEP or GPO. Clients who are also eligible for a state or local pension from jobs that did not pay FICA taxes, may see reduced benefits due to the Windfall Elimination Provision or Government Pension Offset. Pensions get paid first and in full; Social Security gets reduced in most cases.
• Voluntary tax withholding. A majority of clients will likely need to include up to 85% of their Social Security benefits as taxable income. They may find it helpful to voluntarily withhold a portion for taxes. 

Congratulations are in order.

Clients who have been able to wait until 70 before claiming have made a strong, strategic decision for their future retirement income. Kudos to them. Just remember to help them connect the hidden dots. It seems there is always more than meets the eye when it comes to Social Security.