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PERSONAL FINANCIAL PLANNING
Retirement transition:
Crucial decisions
Editor/Author: CPAs are in a unique place. They en- 2033 and then be able to pay only 76%
Theodore J. Sarenski, CPA/PFS counter their clients’ life events many of projected benefits going forward.
times, while each client encounters them There will be reform, as there has been
just once. This experience allows CPAs repeatedly in the program’s 86-year
to compare, learn, and develop tools to history. Social Security is received by
give expert advice to all their clients. approximately one-fifth of the United
Unfortunately, CPAs often get their cli- States’ population, so it cannot disappear.
ents to the point of retirement, and then Despite those broadly shared policy
their advice tapers off. An individual who concerns, decisions about Social Security
retires today from primary employment benefits are necessarily individual. How
likely has 20 to 30 years of life remaining. do you advise clients on when to begin
A CPA’s advice CPAs need to continue advising clients receiving benefits?
throughout their life. Most CPAs’ clients
Actuarially, it does not matter. At
becomes even more are not financial people, which is why whatever age between 62 and 70 indi-
vital once a client they came to a CPA for help. Let us viduals begin to receive benefits, if they
review the factors that you can assist your
live to their current life expectancy, they
retires since poor clients with at a critical time. will receive approximately the same total
decisions about The stage, not the age lifetime benefits. But who is average?
Social Security, Barbara Waxman’s book The Middlescence Also, for couples, the planning becomes
more complex than for a single person.
Medicare, and other Manifesto: Igniting the Passion of Midlife The chart “Social Security Starting
retirement funding (2016) suggests retiring the word “retire.” Ages and Total Benefits” compares three
starting age choices by a couple whose
She defines “middlescence” as adoles-
strategies will hamper cence with wisdom. Waxman asks people higher wage earner’s benefit is $2,000
clients for the rest of to shake off the old idea of education/ per month. Both spouses are the same
their lives. work and family/retire/die to a new para- age, with a full retirement age (FRA)
digm of constant discovery, maximization of 66, and both die in the same year.
of joy, and being open to growth. The lower wage earner’s benefit is the
spousal benefit of one-half of that of the
Social Security primary wage earner, as it is better than
Each year, the trustees of the Social his or her own benefit.
Security trust funds report on the health If they both die at age 75, starting at
of the Old-Age and Survivors Insurance age 62 would have given them the best
(OASI) and Disability Insurance (DI) benefit total. If they both die at age 85 PHOTO BY SAMUEL KESSLER/ISTOCK
funds. The report issued in August 2021 (roughly, their current life expectancy),
predicts that, without reform, under starting at FRA would have given them
“intermediate assumptions,” OASI will the best benefit total. If they both live
run out of trust fund asset reserves in to age 95, it is nearly breakeven between
48 March 2022 The Tax Adviser
