Social Security planning has taken a giant step into the workplace, and retirement planning may never be the same.
Financial Engines announced Wednesday that it is now offering integrated Social Security and income planning to help near-retirees maximize their household income in retirement.
With more than $88 billion of assets under management, Financial Engines is the nation's largest independent adviser, working with more than 550 employers and providing investment help to more than 9 million employees.
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“Social Security is incredibly complex and most people miss out on tens of thousands of dollars in benefits because they don't have anyone to help them figure out the way to claim,” Financial Engines chief investment officer Christopher Jones said. “By considering Social Security in combination with your 401(k), you can unlock hidden value and dramatically increase your retirement income.”
Financial Engines is making the services available to employers offering the Income+ solution for 401(k) plans at no extra cost to employers or employees. The firm has been testing this new tool with selected employers. The Social Security tool showed participants claiming strategies that would result in more than $100,000 in additional benefits income over their estimated life expectancies.
The tool helps users weigh the pros and cons of different Social Security claiming strategies for married couples, single individuals, divorced spouses and widows. The Income+ tool is prepopulated with the employee's 401(k) balance, and in some cases includes a spouse's retirement savings and a couple's investments outside of their employer-sponsored plan.
Users receive a personal retirement income plan, which includes multiple income sources such as part-time work and pensions, and shows how savings in a 401(k) or IRA can be converted into income to help defer Social Security benefits.
In addition, all participants with access to the new services through their employers can talk with a Financial Engines adviser certified by the National Social Security Advisor program at no additional cost.
“Delaying Social Security is a screamingly good deal, especially in today's low-interest rate environment,” Mr. Jones explained. “For each year participants defer claiming Social Security, they receive a 6% to 8% increase in lifetime benefits, which can make a big difference in their quality of life in retirement.”
Beyond enhancing its offering through employers and record-keeping partners, Financial Engines is also making its Social Security planning available to the public at no charge. The public version does not include access to the broader retirement income tool or access to Financial Engines' advisers.
Financial advisers who don't have access to their own Social Security planning software may want to give the new free tool a try or direct their clients to give it a spin. It's a great way to start a discussion about how all the various pieces of a client's retirement income puzzle fit together.
I think this could be a game changer in the retirement planning industry. Although the typical 401(k) balance in the Financial Engines network — about $100,000 — may not be big enough to attract the interest of most financial advisers, delivering Social Security claiming strategies in the workplace could one day be a ubiquitous benefit.
Workers will come to expect this kind of integrated retirement income advice. And when it comes time to roll over 401(k) balances to an IRA, they'll demand that their new financial adviser is no less informed on this important topic.
