How to use Social Security Optimization Tool

As your clients continue to be impressed with your deep insights and accurate forecasting through RightCapital, demonstrate the power of optimized social security withdraws to maximize your client's assets over time. With over 700 filing strategies, this tool simplifies a complex task and makes you look good!

For a brief overview of the optimal Social Security security area watch this short video.

The Social Security tab in the Retirement module provides insight into various methods of engaging social security options. To access the Social Security tab, navigate to the client and select Retirement > Social Security.

To learn how to add social security income to a client's plan, read the article on adding Social Security Income to a client's Plan.

Optimizing Social Security options

The optimal Social Security strategy is calculated on a per-client basis to maximize the dollars the client(s) will receive through Social Security. All potential starting ages are considered and spousal and survival benefits are incorporated. The tool considers client ages, relative benefit values, planning horizons, and a discount rate that reflect the impact of receiving and investing Social Security income earlier into the optimization. This sophisticated computation considers hundreds of options using many variables - this is a hearty and robust social security optimizer!

After RightCapital considers all the inputs provided on the client's plan and has calculated the best option among thousands, the result is presented simply and clearly. The optimal strategy is displayed in the Action Items:

This optimal strategy is compared to four other common strategies from the drop-down menu: the Current strategy, Full retirement age, As early as possible, and Age 70. The Current Strategy reflects the starting ages entered in the Social Security cards.

Demonstrate value to your clients

Powerfully demonstrate your ability to help your clients achieve their preferred retirement lifestyle by comparing the optimal social security strategy with the other common social security strategies, as provided in the drop-down menu.

Many advisors indicate that this one tool from RightCapital is able to grow their book of business and secure clients for many years.

Toggle the displayed graph from Annual (bar graph comparing each year's cash flow under the two compared strategies) to Cumulative (line graph demonstrating the break-even point in net cash flows for the two compared strategies).

The value displayed on the right-hand side is the total difference in income received from Social Security between the two compared social security strategies.

Hovering over the graph reveals the point-values for the point on the graph which is being hovered over.

Setting a Discount Rate

The optimization tool also allows users to incorporate a discount rate when calculating the optimal Social Security strategy. This gives advisors the ability to reflect the impact of receiving Social Security income earlier and investing it, rather than delaying income to receive a larger amount.

In order to enable the discount rate, users can visit the Gear Icon > Settings > Other Assumptions tab and change the “Discount rate used for optimization” setting. Users can select a specific discount rate or use the general inflation rate. If a discount rate is chosen, that rate will be used to discount all future Social Security benefits for each strategy back to the current year. The discount value can be toggled on and off within the Retirement > Social Security module. When the discount value is toggled on, RightCapital will add up all of the discounted values for each strategy, and the one with the highest total will be the optimal strategy listed in the action items.

Use the optimal social security strategy in a client's plan

The Optimal Strategy can be incorporated into a clients' retirement plan by selecting it as the Social Security strategy under the Retirement Analysis Action Items.

How is the current Social Security strategy calculated?

If the client is already receiving benefits, RightCapital will include the amount specified in the Social Security card on the Profile > Income page as their benefits. RightCapital will also make adjustments for spousal or survivor benefits.

If the client has not begun receiving benefits, the current strategy will reflect benefits starting at the age indicated as the 'Starting age' within the Social Security card on the  Profile > Income page.

The benefit amount will depend on the selection made in the Estimated benefit amount drop-down box:

  • Use simple estimate: The projected full retirement benefit is calculated by discounting their salary backward and forward to generate a history of earnings.
  • Based on full retirement benefit: Enter a single line item for the full retirement benefit as calculated by the SSA.
  • Based on historical covered earning: Input their history of earnings as a table by year and RightCapital will utilize those as well as their projected salary to calculate their full retirement benefit.

Once the full retirement benefit is determined by one of the above methods, RightCapital will reduce it if the client takes benefits prior to their full retirement age and apply delayed credits if they wait to take benefits, based on SSA guidelines.

Spousal benefits

The current strategy will also automatically include spousal and survival benefits when appropriate.

How is the optimal Social Security strategy calculated?

The optimal strategy is determined by running through numerous scenarios based on the client and spouse's ages, planning horizons, and relative incomes, and reflects the strategy that maximizes the total dollars they will receive through Social Security.  This includes any applicable spousal and survivor benefits, child benefits, impact of earnings tests, and discount rates when enabled.

RightCapital is committed to enabling your success. Each week, we set aside time to cover important updates and host a Q&A with the product team, giving you a direct line of access to the experts behind the curtain. Visit the Upcoming and Most Recent Webinars area to register today!

Also, be sure to check out the Getting started guide and our YouTube channel for more!

For additional assistance regarding Social Security Optimization in RightCapital please contact Support.