Why your financial advisor may not give you the best Social Security claiming advice

Making the decision about when to claim Social Security retirement benefits is a major one, and working with a financial advisor can be helpful.

However, research has found that advisors’ guidance may be influenced by their compensation structure.

For higher wealth households, working with an hourly advisor like an accountant may lead to claiming benefits two years later compared to working with a commission-based advisor like a broker.

Surprisingly, affluent households who work with any financial professional, particularly brokers, tend to claim Social Security earlier than those who do not.

Experts believe this may be because delayed claiming reduces the assets advisors can manage and potentially makes retirement planning less complex.

This suggests that advisors may prioritize strategies that bring them higher compensation, even if they’re not in the best interests of their clients.

Claiming Social Security retirement benefits at 62 reduces the amount you receive each month for life.

If you wait until your full retirement age (usually 66-67), you receive 100% of your earned benefits.

Delaying further until age 70 increases your benefit by 77% compared to claiming at 62.

However, delaying requires alternative income sources during that period.

Not everyone can afford to wait until 70.

Those who do tend to retire later or have more financial assets.

It’s important to critically evaluate the advice you receive from a financial advisor.

If they recommend claiming benefits early, question their reasoning.

Consider their assumptions about your longevity and the returns you can expect from investing early Social Security income.

Remember, claiming early means potentially jeopardizing your lifetime income.

Even short-term delays of a few months can increase your total benefit.

By delaying, any future program cuts would be applied to a higher benefit amount.