Navigating the Decision of When to Claim Social Security: Are Financial Advisors Biased?

Financial advisors may be biased when it comes to guiding retirees on when to claim Social Security benefits, recent research suggests. While working with a financial professional should ideally encourage individuals to understand the value of delaying their benefit claims, the research found that this is not always the case.

The research, co-authored by David Blanchett and Jason Fichtner, found that the results varied based on the type of advisor. Higher wealth households tend to claim benefits two years later when working with financial professionals who are paid hourly, such as accountants, compared to households that work with commission-based advisors or brokers. On the other hand, affluent households that work with any type of financial professional, particularly brokers, tend to claim Social Security earlier than those that do not.

The research concluded that financial advisors may be biased toward strategies that provide higher advisor compensation, even if those recommendations are not in the best interests of their clients. This finding is concerning, as the decision of when to claim Social Security is one of the biggest decisions retirees face.

Delaying Social Security benefits can be highly beneficial for retirees. By waiting until their full retirement age or even until age 70, retirees stand to receive a significantly higher monthly benefit. This delay also allows for annual cost-of-living adjustments tied to inflation, providing a valuable source of income in retirement.

Not all financial advisors will have the same knowledge of Social Security claiming rules, so it’s important for prospective claimants to evaluate the advice they receive. Experts recommend looking for signs that the advisor has considered factors such as longevity estimates and investment returns when making recommendations.

Ultimately, the decision of when to claim Social Security is a personal one that should be based on individual circumstances. While concerns about the future of the program may prompt some to claim benefits early, experts advise that delaying can lead to a higher benefit amount in the long run. Every month of delay can result in a benefit increase, making it a valuable strategy for maximizing lifetime income in retirement.