A new survey reveals a 28% gap in what future retirees think they will get in Social Security benefits and what current retirees receive.
Specifically, the Nationwide Retirement Institute finds future retirees expect to receive $1,805 a month in Social Security benefits, but retirees currently collecting Social Security receive $1,408 a month on average.
Additionally, more than one in four older adults believe they can live comfortably in retirement on Social Security alone, and nearly half say Social Security will be their main source of retirement income, followed by just 23% of older adults relying on their pension.
“Social Security is one of the most confusing retirement topics that America’s workers are facing today,” Tina Ambrozy, president of sales and distribution at Nationwide, said in a statement. “In fact, our survey reveals fewer than one in 10 older adults know what factors determine the maximum Social Security benefit an individual can receive.”
To combat consumer misconceptions, there’s a need for greater understanding and education around Social Security, Nationwide notes.
In fact, seven in 10 older adults believe they are eligible for full benefits before they actually are.
On average, future retirees incorrectly believe they will be eligible for full benefits at age 63, and 26% think if they claim early, their benefits will automatically go up once they reach full retirement age.
Life events impact Social Security drawing decisions
On average, retirees say they began collecting Social Security at age 62. By contrast, future retirees expect to begin collecting benefits at age 65, on average.
As a result of collecting benefits early, Nationwide adds, retirees are foregoing a progressively higher annual Social Security benefit (for each year they wait up to age 70) to be received over the course of their lifetime.
The main reason for taking Social Security early is typically due to health.
One-third of retirees say health problems keep them from living the retirement they expected, and of those, more than three quarters say their health problems occurred earlier than expected (most often by 5 years or more).
In addition, health care expenses keep nearly a quarter of retirees from living the retirement they expected.
“This data brings to light the importance of planning for health care costs in the years leading up to, as well as through retirement, to help decrease the likelihood of filing for Social Security benefits early and ensuring retirees are financially able to live the retirement they expected,” Ambrozy concluded.
With more than 20 years serving financial markets, John Sullivan is the former editor-in-chief of Investment Advisor magazine and retirement editor of ThinkAdvisor.com. Sullivan is also the former editor of Boomer Market Advisor and Bank Advisor magazines, and has a background in the insurance and investment industries in addition to his journalism roots.