What you don’t know about Social Security can hurt you: Retirees may be leaving hundreds on the table monthly, a survey finds
Could your confusion or ignorance about the Social Security retirement benefit rules keep you from having a secure, comfortable retirement?
Richard Eisenberg, a blogger for Next Avenue, a PBS website devoted to seniors, looked in to the issue recently. What he found is that the answer to the above question is quite possibly.
Recently released findings from an AARP and Financial Planning Association(FPA) survey of what pre-retirees do and don’t know about Social Security shows that nearly half (47 percent) of the pre-retirees surveyed called themselves “very or somewhat knowledgeable” about how their benefits will be determined. But their responses to questions about the rules belie their confidence.
For its report, Social Security Planning in 2015 & Beyond: Perspectives of Future Beneficiaries and Financial Planners, the researchers surveyed 1,215 future Social Security beneficiaries ages 45 to 64 and 1,279 Certified Financial Planners (CFPs).
The Truth About Their Social Security Knowledge
“I’d say that number is higher than the reality,” said David Yeske, Managing Director at the San Francisco, Calif. financial planning firm Yeske Buie, who worked on the survey. “Their understanding of Social Security is pretty good, but there was a huge lack of knowledge about the impact of deferring benefits and about spousal benefits.”
Why does that matter? “The choices people make about collecting Social Security retirement benefits could have a huge impact on the benefits they receive over the next 30 or 40 years,” Yeske noted. In fact, 39 percent of the pre-retirees surveyed expect Social Security to make up 50 percent or more of their retirement income.
The report’s conclusion: “Millions of Americans are at risk of making claiming decisions that leave hundreds of dollars per month on the table and out of their pockets.”
Here are some of the public’s striking knowledge gaps, according to the AARP/FPA survey:
- Nearly four in 10 (39 percent) didn’t know the earliest age you can start collecting Social Security retirement benefits — age 62.
- Although most (88 percent) knew that waiting from age 62 to Full Retirement Age — that’s now between age 66 and 67, depending on when you were born — would increase their benefit amount, only 5 percent knew exactly how much. They’d get a benefit boost of 25 to 30 percent, depending on when they were born.
- Only 57 percent knew that waiting beyond their Full Retirement Age to start claiming benefits could further increase their benefits.
- Just one third know that claiming Social Security benefits at age 70 will result in their maximum benefit amount. (Social Security’s Delayed Retirement Credits boost the size of monthly benefits by roughly 8 percent for each year you defer claiming until age 70.)
- A striking 73 percent didn’t know that when Social Security benefits are withheld due to work income prior to Full Retirement Age they will get the benefits back over time.