With the often-discussed “silver tsunami” forecasting an increase in the senior share of the U.S. population from 56 million today to over 78 million by 2035, the importance and prominence of Social Security benefits in the retirement plans of an increasing share of Americans cannot be overstated. Making the most beneficial decision possible when it comes to the taking of Social Security benefits is only going to become more important as the first step in retirement planning as time goes on.
This is why the incorporation of Social Security into retirement planning may necessitate the inclusion of other professionals in the process, up to and including real estate and even reverse mortgage professionals. This is according to a new column at Financial Advisor magazine.
“Social Security advisory services provide advisors with a natural segue to retirement financial planning and the opportunity to help retirees make smart financial management choices as they age,” the article says. “With the beginning of self-funded and employer-provided retirement plans in the mid-1970s, many of today’s workers have become accustomed to managing their own investments.”
This has led to a shift in the practice of retirement planning, from one on accumulation and growth to the development of a withdrawal strategy that is tax-efficient. It is also a disruptive change, and may lead to a newly-established need for a financial advisor, a need that a retiree may not have previously anticipated.
“Retirement planning based on sequential withdrawals from specific retirement and non-retirement accounts in the most tax efficient way, can provide clients with the highest consistent standard of living throughout their retirement years,” the article says. “This type of planning can involve a high number of constantly changing variables and may require the services of a team of other professionals in the retirement space. These include taxes, Medicare, long-term-care, life insurance, estate planning and possibly real estate and reverse mortgage specialists.”
The partnership between tax and financial professionals has always been a “very natural” one, the article says, and many in one field can hold certification in the other.
“Those financial professionals with an understanding of how taxation of Social Security benefits works, have a valuable opportunity to help mitigate their clients’ tax liability in retirement,” the article explains. “If maximizing Social Security benefits requires waiting to claim for several years, the use of funds from retirement accounts to bridge the income gap can help to reduce the fully taxable required minimum distributions, while also reducing income taxes and specifically taxation of Social Security benefits.”
Read the article at Financial Advisor.
