Incorporate Social Security to grow

Welcome to the walkthrough of BlackRock Social Security Benefits Estimator. Social security is one of the most common planning topics advisors encounter, and when it comes to evaluating collection strategies, this tool is a great place to start. The estimator allows advisors to illustrate Social Security benefit amounts, compare break even points, and evaluate different cleaning strategies for clients who are married, single, widowed, or divorced.

By modeling scenario side by side, the tool helps advisors bring clarity to complex decisions and support more informed retirement planning conversations. So let's walk through a scenario using a hypothetical married couple, Jordan and Alix, as an example. The initial inputs on the first page are straightforward. You'll notice the tool defaults to husband and wife, but it also allows you to enter your client's first names, which helps make it more personalized.

First, we enter year of birth. Here, both Jordan and Alex are born in 1972. You'll notice that the tool runs on an annual basis and does not require exact date of births. This is intentional since Social Security benefits are strictly just estimates, and we wanted the experience to be simple and easy to interpret.

Next, we come to full retirement age, which is based on the year birth and is listed on this client's Social Security statement. For clients born in 1972, full retirement age is 67. You'll notice the tool automatically defaults and highlights this value. So for this page, you can simply just click next. On this page we enter their full retirement age benefit or primary insurance amount, also known as Pia.

This can be found on their Social Security statement, and we recommend using the most up to date version available through the Social Security Administration's website. Using the most current estimate is important, as it helps ensure the tool can accurately determine whether a spousal or survivorship survivor benefit may be payable. For this example, Jordan's primary insurance amount is 3000 and Alex's is 500.

Please note that even if a client is already collecting benefits or is past full retirement age, the tool requires the full retirement benefit amount to be entered, not the amount that they are currently receiving or eligible for at their current age. To support this, the tool includes a Pia calculator.

If a client has already filed, you can select the age their current benefit is tied to. For example, if they filed early, let's say at 62, you would enter age 62 here and their current gross monthly benefit amount.

The calculator will then estimate their full retirement benefit, which can be set by clicking set Pia.

This feature is also helpful for clients who are past their full retirement age but have not yet collected. For instance, if a client is age 70, their statement will only show their current age benefit of 70. So in this case, we would select 70.

And then the amount that is listed on their statement at that age.

The calculator will then back into the estimated full retirement benefit amount needed for the analysis. And you would just click set Pia again.

For today's purposes, we'll keep Jordan's primary insurance now at $3,000.

Lastly, a note on non covered government pensions under the Social Security Fairness Act. The Windfall Elimination provision and government pension offset have been fully repealed. As a result, non covered pensions no longer affect Social Security, retirement, spousal or survivor benefits. Because of this change, advisors do not need to include pensions in the analysis. For more information, a link to the Social Security Fairness Act is available here and provides the official guidance on the next screen you'll see.

They will ask for the partners name. Again, you can customize and put their first name.

Click next. Enter year of birth.

Enter full retirement age.

And then their primary insurance amount, which will be $500 for Alex.

On the next screen, you'll see a summary table showing the potential benefits for Jordan and Alex. While you can hover over the eye buttons, important planning concepts to keep in mind when it comes to spousal and survivor benefits. So first, let's go over some of the main rules to be aware of. If there is a spousal benefit payable, it will always be listed here.

A spousal benefit equals 50% of the higher earning spouse's full retirement age benefit amount, and is only payable if their own full retirement age benefit is lower. In this case, Jordan's full retirement benefit is 3000. Therefore, Alex's spousal is 1500. That's the maximum amount because Alex's own full retirement benefit is less. It's $500. She would receive 500 on her own work record if she filed a full retirement age.

Plus the adjusted spousal benefit of $1,000 off a Jordan's work record for a total benefit of 1500. It's important to note that the additional spousal benefit is only payable once Jordan is collecting. Therefore, there could be scenarios where Alex files for her own benefit first and the additional spousal benefit later. Again, once Jordan files. This creates a planning opportunity and a potential strategy to optimize benefits that many individuals are not aware of.

Lastly, it's important to know that survivor benefits are tied directly to their partner's claiming decision, which is often the most important consideration for a married couple. As a widow, Alex could receive 100% of what Jordan was collecting, or 82.5% of his full retirement benefit, whichever is greater. So, for example, if Jordan delays collecting up until 70, he would receive $3,720.

That would mean Alex's survivor benefit would be $3,720 per month for life. If Jordan predeceased his, her, this is where Social Security often functions as longevity insurance for the surviving spouse, rather than just a retirement income source. If we scroll down, we'll come to longevity assumptions, which is a very important role when evaluating social Security strategies. You'll notice that our tool automatically defaults to 90 and 95.

So it will set the first individual entered into our tool to 90, and the second individual entered into our tool to 95. This reflects the reality that planning often needs to account for different life expectancies within a household. Please note that these assumptions can be adjusted, and the tool allows you to model multiple longevity assumptions. If you'd like to compare the outcomes.

If you'd like to do that, you would just scroll down to the bottom and click Add Assumption. Here on the bottom left of the webpage. For today's walk through, we'll keep it simple and use one standard assumption for Jordan living to 90 and Alex living to 95, which will be carried through to the lifetime benefit analysis.

Scrolling further, we reach estimated lifetime benefits, which always displays at least four different collection strategies.

The first three strategies are part of our tools template. You will find if they are past those ages, the tool will gray them out. For example, if they're past age 62 or past their full retirement age. These two columns will be grayed out in cases where both clients are passage 62. You will also see another column appear here that will say collect.

Now. This will illustrate both individuals filing this year. The first column that we see on the screen here in pink assumes both Jordan and Alex will collect their benefits. At age 62. The second column, shown in yellow, assumes they will collect at full retirement age, or 67. In this case. The third column, shown in green, shows that both of them will file and collect at age 70.

The last column here, shown in purple, shows the hybrid approach. The hybrid approach compares your client's lifetime income benefits from multiple possible collection strategies for the selected life expectancy assumption. The income benefits received for each strategy are summed and compared. The strategy with the greatest total benefits is then applied to each life expectancy to give the highest average overall benefits.

In other words, this column is designed to automatically provide the optimal strategy based on the information provided. In this case, you'll see that the hybrid approach strategy is illustrating Alex collecting her own benefit at 67.

Jordan and collecting his own benefit at 70. And then Alex Refiling for the additional spousal benefit. Once Jordan begins collecting. Now, although this is the optimal strategy, it's important to note that this column and the timeline could also be customized. So we'll cover how to customize this in just a minute. The table show here the lifetime benefit amounts collected for each strategy.

You'll notice again that this hybrid approach yields a couple around 1,556,000 over their lifetime, which is the optimal strategy when comparing the others listed next to it. Now, this will show you the lifetime total benefits. And if you scroll above, you'll see the breakeven analysis. So essentially, if Alex feels she'll live until at least age 81, then maybe they should consider the hybrid approach to maximize lifetime benefits.

If they believe they won't have longevity, then maybe they should file earlier and go with one of the other strategies listed on the report. Another feature to be aware of is that in some cases, the final column may be labeled custom hybrid instead of hybrid approach. When this appears, it does not represent the optimal strategy. Rather, it's designed to illustrate an alternate set of collection ages for comparison.

So I pulled up this example, which is a different client scenario. Just to illustrate this function. This will occur when both collect at age 70 is the optimal outcome. In those situations, the tool defaults to the custom hybrid as the next best strategy so that clients can see a different option. This avoids having two identical strategies displayed side by side in the chart.

This helps keeps the visual comparison clear and meaningful. This example also shows how when the clients are older than 62 and full retirement age, these columns will be grayed out and it also illustrates where the Collect Now column will appear. As I mentioned earlier. Now note that this column custom, hybrid and hybrid approach it can be manually customized to reflect a different strategy.

If you'd like to explore additional scenarios. With that in mind, let's return to some of the other customizations the tool offers. First, the bond ladder. This gives you the ability to model supplemental income strategies that may help clients delay Social Security collection. You would click yes and the tool will do the rest. The supplemental strategy or bond ladder value is calculated by measuring the difference in total income a client would receive by starting benefits at age 62, or their current age if older.

Compared to the hybrid strategy, the income gap isn't discounted to present value, showing the estimated cost in today's dollars of supplementing income. To help the client delay collection while still receiving their desired cash flow. To further customize the bond ladder. This Social Security tool includes a link that opens the AI Bond pool in a separate tab. Just by clicking here.

From there, you can build a bond ladder proposal just as you normally would alongside the Social Security analysis. Second, we can add growth rates to the results below, but you cannot include growth rates along with the bond ladder. So you'd have to toggle this to now.

To include growth rates. You would click include growth rates here. And you'll see the option to add cost of living adjustments or investment return to include cost of living adjustments. You would just click yes and then you'll see you can select anywhere between 0.5% to 4%. Historically, cost of living adjustments have been between 2.5 and 3% on average.

If your clients plan to invest their benefits rather than spend them, you can illustrate what their benefits will grow to by including an investment return here. Again, you click yes and it will allow you to select the annual rate of return between 1 and 8%. Again, if more information is needed, you can hover over the I buttons here.

Third, we can customize a collection strategy. This will update that fourth strategy that we saw below that was labeled hybrid or Custom hybrid. So when you toggle this on to yes, that last column and the timeline will change accordingly. For our custom strategy, Alex will start collecting at age 64, and Jordan will wait until age 68.

Those are their individual collection ages. You'll see the next dropdown will default if there is a spousal benefit payable and you click the first age listed, there.

This means that Alex will receive the adjusted spousal benefit when Jordan begins collecting. And if you scroll down, you'll notice that the column will read Custom hybrid and the timeline will change according to the ages that are selected. Once we're happy with our customizations, we can choose to create a PDF report to share with clients. You can also enter your report description, the prepares name and any prepares information.

If you have any questions about the tool or collecting social Security benefits, please visit our website at www.blackrock.com/fp or reach out to your Blackrock representative. And here is the final report that is end client friendly. We hope this tutorial was helpful as you continue to support your clients in making informed Social Security decisions.

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