Q: A soon-to-be-retiree asked our HR staff some questions about Social Security benefits. From her questions, it was apparent she did not understand the basics about the Social Security program. Is this a topic we should avoid, or should we include it in our retirement education?
A: By all means, include accurate information about Social Security, because for most Americans, it will make up a large portion of their retirement income. According to the Social Security Administration, it will replace roughly 40% of preretirement income for the typical retiree. Considering that many financial advisors recommend striving for replacement of 70% of preretirement income, Social Security may account for more than half of the total in retirement. Yet, misunderstandings about the program abound. When you provide education for preretirees, don’t wing it. Ask your plan service providers if they can offer specific materials about Social Security. It can be especially helpful for this group to have one-on-one meetings with a financial advisor when they have an estimate of their Social Security income in-hand. Among other valuable topics, preretirees need to understand the long-term impact of starting their Social Security benefits too early.