Results of a new survey conducted by Harris Poll on behalf of Nationwide show nearly two in three workers admit they are not confident in their knowledge of Social Security.
The data was drawn from among more than 1,000 U.S. adults ages 50 or older who are retired, or plan to retire in the next 10 years. Among this group, more than half (55%) say Social Security will be their main source of retirement income. This is followed far behind by just 18% of older adults relying on their pension.
“A quarter of U.S. adults in retirement say their social security payment is less than expected, and one in four future retirees believe they can live comfortably in retirement on Social Security alone,” observes Tina Ambrozy, president of sales and distribution at Nationwide. “It is problematic that so many people are planning to rely solely on Social Security for income in retirement. There is a major disconnect between what consumers think their Social Security benefit will be, and cover, compared to reality.”
The survey identifies a number of Social Security misconceptions. For example, most adults think they are eligible for Social Security benefits sooner than they actually are. One positive note: A little more than half of the adults not currently collecting Social Security don’t plan to start collecting early, as future retirees expect to collect Social Security benefits at age 66, on average. Despite those plans, Nationwide says, the most common age at which retirees start collecting Social Security is 62—the earliest age a person can do so.
According to the survey, future retirees expect to receive $1,628 on average as a monthly payment from Social Security. This is almost 30% more than what current retirees say they collect ($1,257).
“There are also key differences between how future retirees anticipate spending their Social Security compared to how current retirees actually do,” Ambrozy says. “Four in ten older adults do not expect to spend any of their Social Security income on health care, yet 58% of recent retirees report spending their benefit on health care.”
Retired Americans who decided to draw early report doing so to pay living expenses (52%) and to supplement their income (43%). Other reasons for early filing given to Nationwide include being laid off or otherwise becoming unemployed (24%), having no other source of income (22%) and because of health issues (16%).
“Concerning, nearly nine in 10 older adults don’t know what factors determine the maximum Social Security benefit an individual can receive,” Ambrozy warns. “One of the best ways people can understand what their benefits will cover, and how they can maximize them, is by consulting a professional for advice.”
The survey findings suggest just 13% of older adults say they have a financial adviser who provides them Social Security advice.
“It’s not that they don’t want the advice. In fact, nearly three in four future retirees currently working with a financial adviser say they would likely switch financial advisers to work with an adviser that can help them maximize their Social Security benefits,” Ambrozy notes. “It’s easy to see why. Those working with a financial adviser report receiving over 20% more in Social Security benefits than those who don’t ($1,500 vs $1,234).”
Most current retirees getting Social Security say they relied on the Social Security Administration prior to retiring to identify their maximum monthly benefit. However, Social Security filing strategies are more effective when highly personalized, Nationwide says.
“Social Security is undoubtedly one of the most complex retirement topics facing American workers, and most are likely unable to grasp the thousands of rules that apply to Social Security,” Ambrozy concludes. “Preparing for retirement holistically by working with advisers and online tools can help adults maximize their benefit and achieve personal goals.”