For a job interview, it’s good to be early. When it comes to claiming Social Security, not so much.

Claiming Social Security before one’s full retirement age meaningfully and permanently reduces the benefit, while waiting until age 70 has the opposite effect, boosting monthly checks by more than 70% compared with claiming at 62. Despite the attractive math, many late-career workers say they want to claim as early as they can, and the reason why has less to do with needing the cash flow and more to do with worrying about the program’s weak financial footing. Simply put, people feel like they need to get their hands on the money while it’s still there.

That’s the key finding of a new survey from the National Association of Registered Social Security Analysts among its members. Respondents said nearly three in four clients want to claim early out of fear of future benefit changes or reductions, based at least in part on the faulty assumption that benefits already in payment will somehow be “grandfathered in” and protected from potential cuts. That’s just not true, according to NARSSA president Martha Shedden, and it’s critical for advisors and other financial service providers to cut through the noise.

Fear Factor

“Registered Social Security analysts work very closely with the public on their claiming decisions, so they’re in a good position to identify worrying trends like this,” Shedden told Retirement Upside. “These results show how strongly fear and confusion are influencing one of the most important retirement decisions people will ever make.”

Other findings underscore the issue:

• About six in 10 clients doubt Congress will fix the federal entitlement program before insolvency in 2032 or 2033.
• The same proportion reported feeling overwhelmed by conflicting advice about claiming, while 45% want a simple answer on the best age to claim.

“That also worries me, because this is not a simple decision, and the presence of conflicting advice clearly doesn’t help,” Shedden said. “Americans aren’t necessarily claiming Social Security early because it is the best financial decision for them. They’re claiming based on misunderstandings and uncertainty about the program’s future.”

The Advisor Angle. While its members were initially tax professionals and financial advisors, the ranks of the NARSSA have grown far more diverse over the past decade, now including insurance agents, mortgage agents, senior care facility managers, attorneys and more. So, if financial advisors aren’t talking with clients about these Social Security topics, someone else probably is.

“The survey is yet another piece of evidence that people need guidance about retirement income planning in general,” Shedden said. “They often don’t know how they can best use the funds they have to fund their retirement. Social Security is the foundation for many people, but it’s only one piece of the puzzle.”

There’s a triple tax break in Americans’ HSAs, but most are only using a third of it.

More employees are contributing to their HSAs than in previous years, with the ratio now up to 83%, but only 22% are investing those contributions, according to a survey from the Plan Sponsor Council of America. This is a missed opportunity, since healthcare costs usually increase above general inflation and can be a significant drain on retirement savings ($185,000 for a 65-year-old retiring this year, by one estimate).

“Most people are just paying their expenses as they go, building up $100 a month, and then the next time they’ve got a prescription that’s due, they use it as an ATM to pay the prescription,” said Andrew Crowell, vice chairman of wealth management at D.A. Davidson. But “the growth you can get on those funds by keeping them there, invested even for one, two, three, four years — that multiplier is so much greater.”

Short-Term Thinking, Long-Term Cost

HSAs have a triple tax benefit: Contributions are tax-deductible, can grow tax-free and then can be withdrawn tax-free when used for qualifying medical expenses. When employees use funds for current expenses, they’re only getting one of those benefits. “I think it is shortsighted,” Crowell said. “What they’re getting wrong is seeing it only as a current tax year benefit, and not seeing the potential for tax-free compound earnings that they can use in the future.”

There are a couple of retirement-specific strategies that advisors suggest for HSAs:

• Save your receipts! There’s no time limit on withdrawals for qualifying expenses, said Tim Steffen, director of advanced planning at Baird. Clients can pay out of pocket now and then reimburse themselves later, after their contributions have had time to grow.
• HSA funds can also pay for Medicare premiums, said Jonathan Lee, a CFA at U.S. Bank.
• Even people who might not be able to pay all their current expenses out of pocket should still try to leave a portion of their HSA funds invested, Crowell said.

If You’re in Line, Stay in Line. Risk-averse clients may be reluctant to invest their HSAs, but they should at least make sure they’re maintaining their purchasing power, Lee said. “You’re going to have to go out on the risk spectrum a little bit to get the 4% inflation rate that we’ve seen recently in medical services,” he said. “But if nothing else, maintain that purchasing power, because ultimately you want to be able to buy the medical services 10, 20, 30 years from now that you’re able to buy today.”

As Benjamin Franklin supposedly said, if you fail to plan, you are planning to fail. He may not have specifically been talking about saving and investing to secure a comfortable retirement, but it certainly applies.

Preparation is especially key for those in or near retirement. They have significantly shorter time horizons than early- or mid-career investors and are battling rising costs of living and healthcare — all while lifespans are increasing. A recent report from Cerulli found that having a formal financial plan in place can significantly alleviate stress: While 40% of roughly 500 retirees surveyed earlier this year said they experience at least a moderate level of financial stress, the figure dropped to 29% among those with a plan.

Retirees “need to know they’ll be OK,” said Ken Lotocki, chief product officer at Conquest, a financial planning software firm. “And ‘OK’ isn’t a confidence score or a success percentage. It’s a concrete action plan they understand and control.”

Why So Stressed?

While retirees with a plan report less stress than those without one, stress is highest for those currently working on one, which implies that financial stress is a main incentive for re-evaluating financial strategies, Cerulli’s researchers said. What’s causing them all this strain? If you’ve been to the gas station or grocery store in the last few years, it’s probably no surprise that rising prices top the list. The report found that 21% of retirees cite inflation as a high or very high source of stress. Next up were healthcare expenses, at 16%, and concern about an economic downturn, at 14%.

Bringing in a professional can help:

• While many savers create plans on their own, doing so can feel akin to managing your own healthcare without seeing a doctor, said Warren Cormier, director emeritus of the Defined Contribution Institutional Investment Association’s Retirement Research Center. “You’ve been doing it, but you have this feeling that you don’t know if you’re doing it right.”
• Significantly more retirees who work with financial advisors are comfortable taking money out of their retirement accounts than those who don’t work with an advisor, a recent survey from AllianceBernstein found. Fewer retirees who work with a professional are nervous when seeing their balances drop, and fewer are worried about running out of money.

What’s The Plan? Not all plans are equal. Instead of an abstract thumbs-up, a good plan offers retirees specific, sequenced steps: “Here’s how long your money will last. Here’s the plan if markets shift. Here’s what you are responsible for, here is what your advisor owns and how often the plan should be reviewed,” Lotocki said.