Helping clients plan for Social Security benefits may involve a lot of information gathering and research, but doing so could save them a heap of headaches and a lot of money. Here are 12 planning tips that stand out to me as potential opportunities. These can provide great relief and keep your clients out of the danger zone.
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Social Security survivors’ benefits are similar to Social Security retirement benefits, but there are certain planning opportunities available to the widowed spouse. As the family’s trusted advisor, make sure you understand these opportunities in order to give your clients the most beneficial advice possible. Here are three planning opportunities for survivors:
1. Planning for Spousal Income Needs. Depending on the age of the parents and children, there is a gap in the survivors Social Security benefits. From a financial planning aspect, it is imperative that you discuss the impact this gap will have on their financial goals. After all, it will affect them for years to come and will determine their income.
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While the Social Security Administration calculates Social Security benefits, it is your due diligence to know the basics so that you can understand how an additional year of earning will affect your clients’ projected benefit.
Some people think Social Security benefits are complicated to figure out; in actuality, it’s pretty straightforward. Social Security benefits are computed through this two-step process:
- Compute the average indexed monthly earnings, called AIME.
- Compute the primary insurance amount, based on the AIME.
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The government is projecting that the Social Security Trust Fund could run out of cash by 2033. While 19 years might sound like a long time, many of us have clients in their 30s and 40s who want to know that they’ll receive all of the Social Security benefits due to them when they retire. Of course, CPAs and those of us who offer financial planning and estate services caution our clients not to depend solely on their Social Security checks to carry them through their later years.
It’s alarming that the money may, indeed, run out—and even though this news is nothing different that what we’ve already heard about the money—I can’t help wondering how many Americans aren’t familiar with how dire the situation may be.
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