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Prepare Your Clients for Reductions in Social Security Benefits

Mike McGlothlin   |   July 2021   |   2-minute read
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What percent of your client’s retirement income will come from Social Security? For 6 out of 10 Americans, it’s more than half. Stop and picture the impact a reduction in Social Security income would have on their retirement.

The COVID Factor

Social Security benefits are likely to change in the near future. In fact, the 2020 Annual Report from the Board of Trustees warned that by 2035 there will only be enough revenue to pay 79% of Social Security benefits.

But these estimates were pre-COVID. After a year of the pandemic, nearly 10 million people were still out of work and not paying payroll taxes. This has greatly sped up the urgency of the problem, as 68 million Americans were forced to move up their retirement age and turn on Social Security benefits sooner.

Some experts predict trust funds may be depleted as soon as 2028. Are your clients protected?

In fact, according to the Center for Retirement Research at Boston College, the current size of the missing trust fund is $27 trillion. It seems natural that 61% of Boomers and 81% of Generation X are worried that Social Security won’t be there for them.

Keeping Social Security Alive

There are several strategies Congress can consider to ensure Social Security is still functioning:

Changes to Revenue
  • Increase Social Security tax by as much as 27%
  • Expand payroll taxes by eliminating the earnings tax
  • Expand payroll taxes on all incomes above $400,000
Changes to Benefits
  • Push back the full retirement age, a tactic they used in 1983
  • Pay benefits at a reduced level
  • Employ means testing to reduce benefits for upper-income workers

Using an Annuity to Fill the Gap

It’s too important an issue to ignore when discussing income retirement plans with your clients. And, depending on where your clients live, there’s a possible solution. It’s an annuity that addresses the unknowns of Social Security. If reductions are made, the annuity contract has a bonus that pays a percentage of the premium over a period of five years. If reductions are not made, it pays a bonus for each five-year period the contract is in force.

Understand the Urgency

Don’t let your clients be caught flat-footed when they open their Social Security statement and see that reduction. Although many clients are counting on Social Security in retirement, many of them don’t feel any urgency to plan today. But the longer they wait, the more likely they are to have less in retirement than they were planning on. It’s something that shouldn’t be ignored. We’re here to partner with you. Reach out to our retirement income consultants at (800) 589-3000 and help protect your clients from the possibility of reduced Social Security benefits.


Social Security Administration 2020 Fact Sheet

Mike McGlothlin
About the Author

Mike McGlothlin, CFP®, CLU®, ChFC®, LUTCF®, NSSA® is a bestselling author, industry-renowned speaker and expert in growth strategies for financial advisors.

Today as the Executive Vice President of Retirement for Ash Brokerage, he leads 65 direct reports who have grown a business line 300% in the last six years and is now one of the largest wholesaling teams in the Brokerage General Agency space.

As a professional guide he can help any financial advisor looking to create exponential revenue growth, to find new clients and better streamline their operations by incorporating his simple methodologies and proven models.