Is This Retirement Income Stream Just “Icing on the Cake”?

Let’s take a quiz.  What retirement income stream:

  • Is adjusted annually to keep up with inflation?
  • Will continue to pay you for as long as you live?
  • Is tax advantaged? (worst case only 85% is taxable as ordinary income)
  • Is backed by the full faith and credit of the United State Government?

 Not sure.  How about this?  There are three big risks to your income during retirement; inflation risk, market risk & longevity risk (you lasting longer than your income does).   Is it possible to have an income stream offers all of the points first mentioned and also cover the three big risks? Yes!!  It’s Social Security. 

 Sounds great doesn’t it?  Then why aren’t more people talking about it?  For too long financial advisors and others have downplayed the role that Social Security will have in your retirement income plan.  If you have asked your financial planner about Social Security you have probably heard something like, “if it’s still there it will just be icing on the cake” or “if you have to figure your retirement income with social security you probably aren’t ready to retire”.  I know…I used to tell people those things.  The fact is that most financial planners know a painfully small amount when it comes to social security and that is a shame.  Especially when you consider that Social Security income accounted for an average of 64.8% of total income for all households with someone aged 65 or older, according to a recent report by the Social Security Administration*.  To further compound the problem the Social Security Administration has moved away from dispensing advice about when or how to elect benefits. 

 So where do you turn for advice?  One place to start would be to find a financial planner that is knowledgeable about Social Security benefits.  You can go to** and look at their directory or just call a local financial planner to see what they know.  Here are a few qualifying questions to ask them:

  • “How much of a cut in benefits will I take if I apply early instead of the normal retirement age?”
  • “If I decide to go back to work after starting retirement, how much can I earn before my benefits are reduced? Does that apply prior to age 66 or after?”
  • “What is provisional income?”
  • “How will it impact my spouse if I elect now and then die?”
  • “What is the file and suspend strategy?”
  • “What is a restricted application?”  (look for more on the last two items in another article)

 If they make it through these questions without too much bumbling around they may know more about Social Security than the average financial advisor.   A word of caution here, expect to pay for this.  If they offer Social Security planning for “free” there will most likely be an investment pitch tied to it. 

If you have any questions about this or other financial planning topics please don’t hesitate to contact me at

*Income of the Population 55 and Older, 2008—Social Security Administration

**Social Security Timing is not affiliated with or endorsed by Carroll Investment Management or LPL Financial.