Truly holistic retirement planning should consider these two things…

Bravo to Martha Shedden for standing up against the tide of traditional retirement planning that generally ignores the use of all assets to fund retirement! Shedder is a Registered Social Security Analyst and Chartered Retirement Planning Counselor. In a recent column in the financial blog Think Advisor Shedden asserts holistic retirement planning includes not only investment accounts but also Social Security claiming, tax strategies such as Roth IRA conversions, long-term care, and reverse mortgages.

Many financial advisors may throw the word holistic around, when in fact most are making client recommendations that ignore other assets, most notably the home and its potential to create additional cash flow.

Shedden points out traditional retirement planning focuses on asset allocations, the rate of return, and historic volatility. Considering the consequences for unwary investors the phrase, “Traditional retirement planning yields typical results”. A 2013 Morningstar study Alpha, Beta, and Now Gamma found a 22.6% increase in retirement income using five strategies. (1) total wealth including Social Security, (2) withdrawal sequences, (3) incorporation of other products, (4) employing tax-efficient strategies, and (5) liability and asset allocation optimization.  Morningstar’s study notably omitted the consideration of a reverse mortgage under the incorporation of other products.

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What is the largest ‘asset’ retirees hold? It depends. For some, it’s Social Security. Shedden writes, “Social Security must be considered a retirement asset. Given that the average monthly benefit payable in January 2022 will be almost $1,660 ($19,884 annual), a retiree living for another 25 years will collect over $497,000. Equity in homes is another hidden asset that can be tapped if needed. So, for many retirees, Social Security is their largest asset”. Considering this it’s quite concerning that only 29% of Americans worked with a financial advisor. That’s means two-thirds likely did not seek professional advice on how and when to begin claiming Social Security benefits.

Right now you may be wondering if perhaps reverse mortgages and Social Security planning are the two most overlooked elements of retirement income planning. That oversight could be costing Americans hundreds of thousands of dollars. In a National Association of Registered Social Security Analysts video Shedden reveals, she’s helped some clients receive over $20,000 more a year. Couple that with the significant opportunity cost when a retiree doesn’t contemplate using their home’s value to create additional cash flow.

In the June edition of Financial Advisor Magazine, Martha Shedden wrote, “The need for Social Security advisory services is unprecedented. Nearly all financial advisors’ clients will qualify for Social Security benefits, most claimants (96%) do not maximize their benefits, and the rules are extraordinarily complex.” Ninety-six percent of those claiming Social Security are losing out. That’s perhaps why she repeatedly stresses that making an optimal Social Security claiming decision is the first step in retirement financial planning. According to the Social Security Administration, 96% of the U.S. workforce are covered by the program. Those statistics should shock any financial professional. But here’s another. Seventy-eight percent of U.S. households 65 and older own their homes, according to a Harvard University study.

In the final analysis, a frightening realization is becoming clear. The vast majority of Americans are either uninformed or not seeking advice to best manage and benefit from their two largest assets: Social Security and their home. Perhaps now it’s time to find a Registered Social Security Analyst near you and determine how to best help local retirees.

Martha Shedden Social Security & Retirement Planning

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