A new survey and white paper published by T. Rowe Price shows that while the American public holds Social Security in high regard, many people across age groups hold incorrect views about key elements of the program.
People also generally have a hard time estimating their projected benefits, and many wrongly believe that benefits automatically start at full retirement age. Another finding is broad-based pessimism about the future of Social Security, with many Americans expecting that the program could soon go bankrupt and disappear even though policy experts see this as highly unlikely.
The survey was published on the same day that President Donald Trump’s nominee to lead the Social Security Administration, Fiserv CEO Frank Bisignano, testified before the Senate Finance Committee. Both the hearing and the report demonstrate that Social Security is as important as it is troubled, with 50% of people aged 65 and older receiving at least half of their income from the program and some 25% relying on it for 90% or more of their income.
Pessimism is particularly prevalent among younger generations, according to T. Rowe's survey, with both Gen Z and millennials expecting to receive only just over half of their scheduled benefits. In contrast, baby boomers anticipate receiving 88% on average. These figures show how important it is for advisors to advocate for continued Social Security funding as well as educate clients about the program's outlook and its claiming strategies.
“This research identifies a major gap in retirement savers’ knowledge about Social Security benefits that can adversely affect their retirement,” Roger Young, a senior financial planner at T. Rowe Price, said in a statement. "Whether investing on their own or through a financial advisor, it’s critically important for investors to learn as much as they can about Social Security. Greater understanding can help individuals make more informed decisions and lead to better retirement outcomes.”
What Americans Don't Know
Despite having the highest accuracy rates on Social Security questions, older respondents still had notable gaps in knowledge. While nearly all pre-retirees (aged 50 and older) understood that a reduction in benefits occurs when Social Security is claimed before full retirement age, only 62% understood that benefits increase if they delay their claim beyond the full age.
Additionally, only 45% of those older than 50 knew their approximate Social Security benefit amount. Younger respondents, particularly Generation Z and millennials, showed even less understanding. While 80% knew that Social Security is funded by payroll taxes, two-thirds incorrectly believed that benefits automatically start at age 65 if not claimed earlier.
Meanwhile, confidence in Social Security's ability to pay out currently scheduled benefits was “remarkably low” among survey respondents, with only 38% expressing confidence. Also notable, none of the survey’s proposed solutions to Social Security’s long-term funding challenges gained widespread support from respondents.
Congress not taking any action, thereby allowing Social Security trust funds to run dry and resulting in a 20% benefit cut, was the least popular solution, with 60% disliking it and only 13% liking it. Raising or eliminating the income cap on payroll taxes, while receiving the most support among the solutions, still garnered approval from only just over one-third of respondents.
According to T. Rowe’s survey, strong majorities of older workers correctly answered questions about the basics of the Social Security program, with accuracy rates for workers older than 62 ranging from 66% to 94% depending on the question. The vast majority (92%) of pre-retirees (age 50 and older) were aware that benefits are reduced if Social Security is claimed before reaching full retirement age, but only 62% understood the advantages of delaying claims beyond that age.
Younger Generations Lag Behind
As expected, younger workers in the study — especially Generation Z and millennials — answered fewer questions about Social Security correctly. A majority of workers younger than 50, for example, did not realize that benefits are adjusted for inflation, and two‑thirds incorrectly believed that benefits start automatically at age 65 if not claimed earlier.
This lack of understanding could cause people to overlook the positive effects that these benefits can have on their long‑term retirement outlook and diminish their perception of the system as a whole, according to T. Rowe researchers.
Many workers ages 50 to 61 (71%) and those older (63%) struggled to identify their full retirement age for Social Security, which is determined by their year of birth. The most common incorrect age reported was 65, with 31% of those ages 50 to 61 and 18% of older workers making this error — perhaps confusing it with Medicare eligibility.
Another common FRA selection was age 70, with 20% of both groups making this mistake. Limited understanding of full retirement age and its connection to benefit levels can lead to a lack of proper planning, the report warns. Examples include claiming benefits early while still employed and married couples not coordinating their benefit claims effectively.
Where Americans Go for Insight
One of the most frequently used sources to access information about Social Security was the Social Security website, SSA.gov, used by 64% of respondents. Although most people relied on their employer-sponsored retirement plans for financial advice, only 33% used them to learn about Social Security benefits.
Among those who work with financial advisors, on the other hand, 67% turned to them for Social Security benefit information, which is on par with other top sources. This leaves an opportunity for advisors to better engage the one-third who do not seek their guidance.
“Interestingly, individuals who used advisors tended to explore all available information sources more than those without advisors,” the report explains. “This suggests either a natural inclination to seek advice or encouragement from their advisors.”
Respondents with household investable assets under $50,000 were less likely to cite any sources for Social Security information. While it’s expected that they might consult financial professionals less frequently, their reliance on SSA.gov was also significantly lower at 50%.
“Given that Social Security will likely make up a large portion of retirement income for this cohort, this lack of engagement is troubling,” the authors conclude. “Similarly, individuals who felt that they were not saving enough for retirement also tended to utilize information sources less often.”
On average, 45% of workers older than 50 said they knew their approximate monthly Social Security benefit. However, among those with less than $50,000 in investable assets, only 33% were aware of their approximate benefit amount.
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