Choose Wisely: Social Security and the Holistic Approach to Retirement

Since interest rates were hiked on Jan. 2nd, long term bonds—which shift inversely with rate changes—need to be replaced with safer alternative strategies in retirement portfolios. Fixed indexed annuities combined with life insurance providing a permanent tax-free death benefit is one such strategy.

The future of public programs, like those provided by the Affordable Care Act and Social Security, is anything but certain. For many baby boomers who are retiring now, however, Social Security will likely make up a good portion of their income. That means understanding how Social Security works is of paramount importance.

Although people tend to think of Social Security as something they “just get” when they reach a certain age, Jeff Gove and his partners, Scott Nachtigal and Tim Kulhanek, founders of Stonebridge Insurance and Wealth Management, note that this isn’t the case.

“There are actually hundreds of different ways a person can draw Social Security, but most people don’t know that,” Gove says. An article in USA Today (“How Much Will I Get from Social Security If I Make $50,000?”, Dec. 1, 2016) reports that a worker making $50,000 who has paid into the system for 35 years can expect to draw about $1,800 per month in Social Security after retirement. But this amount can decrease by up to 25 percent or increase depending on how the plan is structured.

“It’s important to make choices from the beginning that can provide the optimal benefits,” Gove adds, “because there are penalties for changing the plan, and there’s a very small window when changes are allowed.”
One reason many soon-to-be retirees don’t know about their Social Security options has to do with where they’re getting their information. Nachtigal remarks, “By law, the people who work at the Social Security Administration can’t offer advice; they can only answer questions and present options. And most people don’t know what questions to ask.” Not asking the right questions can mean the difference between getting all one is entitled to and getting much less. Although more and more people approaching retirement are turning to financial professionals for assistance with what can be a dizzying array of options including health care and life insurance considerations, not all financial professionals or retirement plans are created equally.

Gove, Nachtigal and Kulhanek, who have written articles for Fortune Magazine and have written for and appeared live on Fox Business, stress a holistic approach to planning. “If someone is only securities licensed and not insurance licensed, or vice versa, they will not be able to come up with the most comprehensive plan,” Nachtigal warns, “and if they don’t understand how Social Security works or how it’s taxed, that can really put the client at a disadvantage.”

A rounded approach includes considering Social Security, retirement savings accounts like IRAs and 401(k)s, insurance, medical expenses and more. Gove notes that “punching holes” in the plan is important to see where certain aspects of life may need more consideration. “It’s crucial to think about what happens if someone has to go into a nursing home and to consider the very real possibility of high medical expenses,” he adds. Nachtigal agrees, noting that while people tend to focus heavily on life insurance, life insurance needs tend to go down after retirement, and living expenses, such as long-term care, are what retirees need to be thinking about in most cases.

With so many moving parts in a retirement plan, and so many different companies offering products that address one or more areas, it can be confusing to discern which one to choose. It might seem that the easiest option is to go with one company and use all of its products, but this approach may not yield the best handling of assets. The partners advocate, instead, choosing the optimal products — regardless of what company is offering them — and curating a custom plan that works. “It’s important to shop around,” Gove advises. “That’s one of the best way to build a comprehensive plan that will help to cover all the bases.”

Crucial in all of this is the appropriate guidance. “The last thing a financial professional should be doing is trying to sell a product,” Kulhanek stresses. “The No. 1 concern should be, ‘How will these options make retirees’ lives better?’ The aim is to put together a plan that will be beneficial and for the retiree to understand exactly what each product that was chosen is doing for them.”

Gove adds that going into retirement debt-free, if at all possible, is a great move. Although working for an extra year or two may not sound appealing, it may be worth it if the outcome is being able to pay down accounts before retiring and having a potentially higher monthly benefit payout.

Although the future of Social Security is unsure, it is currently still the base of most retirement plans. Understanding how it works and choosing the best option available to you right from the start is important to helping ensure that base is strong.

Contact Info:
Name: Jeffrey Gove
Email: Send Email
Organization: Stonebridge Insurance and Wealth Management
Address: 89 Ionia NW, Suite 600, Grand Rapids, MI 49503
Phone: 308-698-0144

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Release ID: 186233