Most retirees get little advisor help on Social Security: Study

A majority of older Americans get no professional advice about a key part of retirement planning — Social Security — even if they work with a financial advisor, a recent study concluded.

Released by Nationwide Retirement Institute, the study (click here to download) says that among people either nearing retirement or already retired, fewer than a third have a financial advisor. And of those who do work with a pro, 59 percent have not been advised on Social Security benefits. The findings are consistent with the past two years' study results.

"A lot of this is due to the fact that [most] advisors wish they had more information about Social Security rules and regulations," said Kevin McGarry, the institute's director, citing that internal research shows 63 percent want to learn more. "Most advisors don't have [extensive] knowledge about it, so they don't it bring up to their clients."

Social Security with dollar bills
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The online survey polled people age 50 and older, separating them into three categories: future retirees (planning to retire within 10 years), recent retirees (under 10 years into retirement) and 10-plus retirees (retired for 10 years or more).

Broken down by group, 32 percent of the future retirees surveyed say they have a professional financial advisor, recent retirees 23 percent, and 10-plus retirees 26 percent.

Among respondents who do work with an advisor, 10-plus retirees are less likely to be getting Social Security advice (23 percent) compared with recent retirees (41 percent) and future retirees (52 percent).

While skepticism and concerns swirl across the country about Social Security's long-term solvency, many financial advisors stress that it remains an important piece of retirement planning, especially if you are close to retirement or already there.

"What we've been seeing is that the Social Security system isn't doing away with giving benefits, but they're reducing the amount of benefits you get." -Avani Ramnani, director of financial planning and wealth management at Francis Financial

"It's important to look at your different options with Social Security, because there are choices to be made that have long-term effects," said Ben Tobias, a certified financial planner and president of Tobias Financial Advisors.

In simple terms, advisors who take Social Security into consideration help clients make the most of their benefits through strategies that maximize income and minimize taxes as part of their whole retirement income plan.

Incidentally, the Nationwide survey also showed that 24 percent of future retirees either guess or don't know how much their Social Security payments will be, and 30 percent of current retirees — both recent and longtime — say their benefits ended up being less than expected.

Of the 60.4 million Americans receiving Social Security benefits, 40.5 million of them are retirees, according to the latest data from the Social Security Administration. The average monthly payment is about $1,300.

(Source: Nationwide Retirement Institute Consumer Social Security Study, June 2016)

The data also show that retired workers and their dependents account for 72 percent of total benefits paid. (Disabled workers, their survivors and survivors of deceased workers comprise most of the rest.)

Additionally, the average person over age 65 relies on Social Security for about 40 percent of their income, according to the data.

Many advisors say they operate on the assumption that Social Security will continue to exist but that more benefit cuts are likely to come, especially among higher-income Americans.

"What we've been seeing is that the Social Security system isn't doing away with giving benefits, but they're reducing the amount of benefits you get," said Avani Ramnani, CFP and director of financial planning and wealth management for Francis Financial. "We tell [wealthy] clients that the Social Security system will be around in some form, but by the time you get the money it might not have as much purchasing power."

The program is expected to be fully solvent until 2034, at which point it will only be able to pay about 77 percent of benefits if lawmakers do nothing to address the shortfall.

Tobias said that in the 1990s, when he started doing financial planning, he told his younger clients not to count on Social Security at all.

"At that point, nobody thought Social Security would be around," he said. "Today, when we're talking to [wealthy] clients, for people who are 55 and older, we factor in Social Security as the laws are right now. With [wealthy] clients under 55, we talk about it, but more in the way of 'It'll be gravy if it's there, but let's not count on it.'"

He stressed that for middle-class America, however, "Social Security will be there," he said.

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The survey also found that 76 percent of future retirees who either work with a financial advisor or plan to hire one say they are likely to switch to one who could show them how to maximize their Social Security benefits.

Tobias said people should ask their advisors about Social Security if the advisor fails to bring it up.

"Even if the advisor is not capable of giving thorough advice about Social Security," he said, "they can direct them to someone who is or to other resources that can help."

— By Sarah O'Brien, special to CNBC.com