The disadvantages of claiming Social Security early at age 62 lead to lower overall benefits and smaller monthly funds for the recipient’s collection period.
“Only 7% correctly identified all the listed factors that determine the maximum Social Security benefits an individual can receive.”
While necessary for some, waiting until the full retirement age of 67, or even better, the maximum retirement age of 70, results in a far more substantial retirement income flow.
Yet Nationwide Retirement Institute found Americans are planning to begin benefits early because of the uncertain economic environment, fears of a depleted Social Security Trust Fund, and a possible looming recession.
In fact, one in four (26%) Boomers who are not currently receiving Social Security plan on filing for Social Security benefits early while continuing to work. Almost two in five (39%) Boomers who are not receiving Social Security plan to draw their benefits before their full retirement age.
Adding to the fear and confusion, Nationwide found a significant misperception about Social Security: more than two-thirds of Americans don’t realize that Social Security is protected against inflation.
“Every year, we find that all generations need more Social Security education, but in this uncertain economic environment, it’s more important than ever for people nearing retirement to understand that their Social Security benefits are protected against conditions such as inflation,” Tina Ambrozy, senior vice president of Strategic Customer Solutions at Nationwide, said in a statement. “There is an immediate opportunity for financial professionals to clear up clients’ misconceptions about Social Security to alleviate their fears and help them stay on track toward their long-term retirement goals.”
The Social Security “knowledge gap” includes:
- Only 7% correctly identified all the listed factors that determine the maximum Social Security benefits an individual can receive
- Almost half (49%) of adults don’t know or aren’t sure what percent of their income is or will be replaced in retirement by Social Security, and more than two in five (44%) of those not currently receiving Social Security aren’t sure how much their monthly Social Security payments will be
- Only 13% of adults correctly guess their full retirement age based on their year of birth
- Almost half (49%) mistakenly believe if they file early, their benefit will automatically go up once they reach their full retirement age
“It’s understandable that people are worried about retirement in the face of the current economic environment,” Ambrozy concluded. “Individuals at all stages of their careers can benefit from educating themselves about the Social Security system and retirement planning, and a trusted financial professional can help with that education.”
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.