401(k) Specialist Issue 1 - 2023 - 16

Don't Forget Social Security
When he does his presentations, Fraser
often walks into a room and holds up a
lottery ticket. " Everybody knows what it is, "
Fraser said, noting that the average family
that makes $40,000 a year or less might
spend $1,000 a year on lottery tickets. " The
reason they do it is because they're hopeful.
They think, 'there is a chance I could win.
In my retirement, my life will be looked after.'
We know that's not true, " Fraser added,
noting it's something like a 1-in-292-million
chance.
for participants. " Here's a person who had
$60,000 in their account on Dec. 31, 2021.
And now they have $48,000 because the
market's gone down, say 20%. They get upset
and think, 'What should I do next?' Go to
cash, some sort of fixed account? You get on
the phone with that person and they're very
upset. You say, 'Well let's take a look at your
portfolio. What do you think you have?' "
People tend to forget about Social
Security-or they've been conditioned by
politicians, the media or even the retirement
industry not to count on it. They might say, " I
" There's a reason that we do this
stuff, and it goes beyond pure
finance and numbers. It's about
changing lives. "
- George Fraser
the plan so often. I think it's a really important
piece that we need to spend more time on. "
Fraser notes that if you think about the way
a general retirement presentation goes, it often
starts out with something like, " Social Security
may not be there for you, so unless you're saving
15%, you'll never have the million-dollar
account-and therefore look like the people
on our brochures. "
This drives him crazy.
" It's a bunch of baloney. And that's what we
feed to all these average Americans every day, "
Fraser said. " And the bottom line-it's not true.
No one says you have to be wealthy. You really
need to find a place to cover your expenses and
have some fun opportunities sometimes. "
He likes to remind participants that even
$1,000 a month in Social Security payments
between age 65-85 equates to a quarter of a
million dollars. And it's a lot more than that
when you consider the average monthly Social
Security benefit was $1,681 in 2022, and
it jumped to $1,827 in 2023 thanks to that
8.7% COLA increase.
Benartzi pointed out that only 9% of
Americans delay claiming Social Security in a
meaningful way. He cited a recent paper from
the National Bureau of Economic Research
that found people leave a median household
loss of $182,370 on the table by not waiting
until age 70 to claim-and over 90% should
wait until age 70 to claim but only 10% do so.
" You don't have to claim when you retire.
Most people don't know it, " Benartzi said,
adding that among people following his strategies,
60% delay claiming.
Because of the high value of waiting to
The next thing he talks about is, " Well,
since you're not going to win, let me tell you
about the lottery ticket you've already won,
and that's Social Security. "
Fraser figures that around 90% of people
who are age 65 have $60,000 or less in their
401(k) plan. Talking to leaders at some of the
largest recordkeepers in the industry, Fraser
made this statement and asked if they would
agree. " Guess what they said? 'The percent is
higher and the number's lower. It's between
$30,000 and $60,000. "
Then you think about how the market
dropped in 2022, lowering account balances
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ISSUE 1 2023 | 401kSpecialist.com
had $60,000, but now I'm at $48,000. "
" Well, that's not what you had, " Fraser
replies. " Worst-case scenario, you have
$250,000 in Social Security at age 60, so that's
$310,000 and you're down $12,000. " And by
the way, Fraser points out, that $250,000 is a
fixed account-it's not going down. In fact, it
went up last year with the 5.9% cost-of-living
adjustment (COLA), which went up to 8.7%
for 2023.
" Do you know what happens when you
have that conversation? People say, 'Oh my
gosh, you're right, George. I hadn't thought
about it that way.' Because all we do is focus on
claim, the research concluded workers should
do everything they can to delay, including
withdrawing from retirement accounts before
tapping Social Security.
The Longevity Puzzle Piece
Another part of the equation when it
comes to helping participants with decumulation
is having an informed idea about a
participant's longevity.
" Most companies believe that everybody's
going to die at 95-no matter your health
status, etc., " Fraser said. " I love the industry, but
this is the kind of stuff that drives me crazy. "
Benartzi, on the other hand, drills down
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401(k) Specialist Issue 1 - 2023

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