Retirement Benefits:
A New Preoccupation for Baby Boomers

Sponsored by Surgent McCoy, CPE, LLC
Pursuit, September 2006

As baby boomers get closer to retirement, their interest in the intricacies of Social Security is increasing. Social Security has many planning implications, including tax, for which professional advice is needed. The sheer size of the boomer population base, coupled with ongoing changes and proposed modifications in Social Security, makes this a topic of great interest among CPAs and their clients.

Hopefully, Social Security won't be the sole source of postretirement income, but rather, one component of a three-pronged plan that includes private retirement plans and private investment income. Coordination of all the various rules and limitations is crucial for a successful retirement. In this article, we will focus solely on Social Security.

Analyze the factors that will determine your client's Social Security benefit, and determine how each weighs on a number of other important decisions. Funding medical coverage to supplement Medicare and providing efficient access to prescription drugs are just two of the many issues to be considered. Some of these decisions require action many years in advance; others can be made closer to retirement.

A fundamental question for many clients is when to retire. The retirement age for the collection of full benefits is increasing, and those who retire before that age will experience a corresponding decrease in benefits. This issue of benefits-dependent retirement age requires a series
of "what if" calculations.

Spouses who may be entitled to individual benefits or spousal benefits must also be considered. For example, whether a spouse should return to work to build up more credits is an issue that empty nesters must face at least 10 years before their projected retirement age. In some cases, no additional Social Security benefits will be earned, although other benefits may be accrued with a return to the workforce. The impact of continued work on Social Security is a major factor to be considered. In some cases, shifting compensation income to the spouse may reduce overall benefits; in other cases, it may enhance them.

Clients also need to understand how future income will impact their benefits, and be armed with strategies to help save benefits, taxes, or both. CPAs can provide baby boomer clients with a valuable service by providing practical advice and planning strategies as they approach retirement.