The average American feels like they have a grasp on Social Security, but new research shows that assuredness about the program’s basics stands in contrast to their actual understanding of its critical components.
According to Nationwide’s 8th Annual Social Security Consumer Survey which was conducted by The Harris Poll on behalf of Nationwide Retirement Institute, more than half of Americans express confidence that they know exactly how to optimize their Social Security benefit. But a mere 6% actually understand all the factors that determine the maximum benefit someone can receive.
The report highlighted additional knowledge gaps:
- A full 39% don’t know the eligible age to receive full benefits.
- Just over half of those who are not already receiving Social Security (51%) do not have a clear understanding of how much they will receive in future income.
- Thirty percent are unaware that Social Security may offer benefits for their spouses and children.
- Over a third (37%) incorrectly assume that Social Security benefits are not protected against inflation.
- Nearly half (45%) mistakenly believe if they claim their benefits early, their benefits will go up automatically when reaching full retirement age or don’t know this is false.
Current beneficiaries show knowledge gap
Even those who are currently receiving Social Security benefits don’t understand the program’s basics. The study found that 55% of current beneficiaries don’t know what percentage of their pre-retirement income Social Security is replacing.
“It’s indisputable that Americans across all generations need more Social Security education,” said Tina Ambrozy, senior vice president of Strategic Customer Solutions at Nationwide.
The report points to a reason that American’s may not be up to speed on the benefits of Social Security: they doubt it will even exist when they’re ready or need to claim their benefit.
Approximately seven in 10 adults age 25+ (71%) worry about the Social Security program running out in their lifetime. This concern increases when comparing generations with 77% of millennials (77%) agreeing, 83% of Gen Xers and even 61% of baby boomers.
Nearly half of millennials (47%) currently believe that they “will not get a dime of the Social Security benefits they have earned.”
Opportunity arises for financial professionals
The Social Security confusion may create significant education opportunities for financial advisors. More than half of adults aged 25+ (53%) who work with a financial professional say that person doesn’t provide advice about how and when to file for Social Security benefits. But 66% say they would consider a change to a financial professional who could.
Nationwide’s Ambrozy says that “Social Security is too complex for many Americans to navigate alone” and therein lies the opportunity.
“There is an immediate opportunity for (financial) professionals to answer clients’ call for help and ensure their strategy aligns with their long-term planning and retirement goals.”
Lynn Brackpool Giles is a contributing editor to 401(k) Specialist. Giles is a former Managing Director of Communications and Consumer Services for the Financial Planning Association (FPA), where she oversaw all corporate, legislative, and consumer communications. In her current journalistic practice, she is a frequent contributor to numerous financial services industry publications.
