Planners get wake-up call on Social Security; no increase for 2nd year
DELAYING RETIREMENT: Financial planner Bill Entwistle, above, encourages clients to postpone retirement to collect as much as possible in Social Security. Such a delay can also make up for limited increases in Social Security benefits.
If retirement planners needed another reason to persuade their clients not to rely solely on Social Security in retirement, they got it last month.
The Social Security Administration announced on Oct. 15 that for only the second time in the program’s 75-year history, the government would not increase benefits because inflation held steady. The news sent senior citizens into a frenzy and led House Speaker Nancy Pelosi to propose a lump $250 check for Social Security recipients.
Rhode Island financial planners called it additional ammunition in their battle to encourage workers to think about living during retirement with more than a Social Security check.
“It’s a reminder that this is one source of income in retirement,” said Jenny Andersson, president of the Financial Planning Association of Rhode Island. “It’s not supposed to boost your lifestyle. It’s a safety net more than anything.”
The average retired worker receives $1,172 in Social Security benefits each month or $14,064 annually, according to the Social Security Administration. More than 58.8 million American receive Social Security, including 34.4 million retirees. In 2008, it represented the primary source of income for 64 percent of retirees.
And while historically the increases have been small, averaging 4.4 percent a year between 1975 and 2008, over time they add up, said Dan Forbes, a financial planner in Providence. Retirees also may have been spoiled when benefits rose 5.8 percent in 2009, the largest increase in 27 years.
“People tend to think of things the way they are now [as] the way they’re always going to be,” Forbes said.
With no increases for the second-straight year and a market still struggling, some of Forbes’ clients are re-evaluating.