Consumers Clueless on Key Social Security Benefits: FPA, AARP Survey

FPA President Ed Gjertsen said in a statement that “Social Security in retirement requires more than just retiring and collecting a monthly check from the government. There are many nuances to Social Security and ways to maximize benefits that, unfortunately, many consumers are not knowledgeable about – and it’s costing them.” 

Among the key findings of the survey: 

• Thirty-nine percent of respondents believe Social Security will make up at least half of their income, though prior AARP research found that retirees’ reliance on SS benefits increases as they age. While 34% of retirees aged 65-69 receive 50% or more of their household income from Social Security, by age 80, that percentage increases to 60%.

• More than 4 in 10 planners (42%) say Social Security is likely to be a major source of income in retirement for their clients.

• When it comes to their knowledge of how their benefits would change if they waited to start claiming Social Security benefits at their full retirement age, 83% of respondents overestimated or underestimated the amount of money they would receive: 67% underestimating and 16% overestimating their full retirement-age benefits.

• Consumers also showed ignorance on timing their benefits claiming to maximize survivor benefits, while 74% of those who have ever been married don’t know that they need to have been married for a minimum of 10 years to collect spousal benefits if divorced; 34% believe they need to have been married only five years to collect those benefits

• Thirty-nine percent of consumers didn’t even know they can start claiming early benefits at age 62.

• The largest single source of consumers’ information about Social Security benefits is friends and family — 46% — followed by the Social Security Administration (45%) and newspaper articles (33%). Only 16% said they get their information from a professional financial advisor.

Among the key disconnects between consumers and CFPs:

• While 28% of CFPs recommend to clients that they wait to claim benefits until age 70, only 13% of consumers plan to wait that long (and it’s likely that more CFPs would recommend waiting if that were the only retirement planning issue involved).
• More than 90% of CFPs recommend clients review their Social Security benefits at least once every several years, while only 64% of consumers said they had done so within the past two years,
• Among CFPs, 50% accurately estimated the number of years that the Social Security Old Age trust fund will remain solvent under current projections — 10-20 years — compared with 27% of consumers, many of whom expected the trust fund to expire earlier. 

Summing up, AARP Chief Public Policy Officer Debra Whitman said in a statement that “we found that far too many consumers don’t understand the rules of the road, and this is a case where lack of knowledge can have a major impact for the rest of their lives.”

— Related on ThinkAdvisor:

• How to Get Social Security Benefits From an Ex-Spouse
• Early Social Security Claims Are Hurting Retirees