When it comes to Social Security benefits, many Americans may be leaving a lot of money on the table — but financial professionals and employers can help with that, according to Nationwide's 8th Annual Social Security Consumer Survey, conducted by The Harris Poll on behalf of Nationwide Retirement Institute in Columbus, Ohio.
"Too many people think claiming Social Security is as simple as flipping a switch once you turn 62. Because of that, they don't educate themselves and often have misconceptions that can have costly repercussions," Tina Ambrozy, senior vice president of Strategic Customer Solutions at Nationwide, told BenefitsPRO, a sister site of ThinkAdvisor.
What U.S. Adults Don't Know
For many Americans, Social Security is their primary — if not only — source of retirement income, and so it's important to know how Social Security works to ensure their filing strategy aligns with their long-term planning and retirement goals, Ambrozy said.
While more than half (54%) of the 1,931 US adults surveyed say they know exactly how to maximize their Social Security benefit, only 6% know all the factors that determine the maximum benefit someone can receive.
Indeed, two in five (39%) don't know the eligible age to receive full benefits, and 45% mistakenly believe if they claim early, their benefits will go up automatically when reaching full retirement age or don't know this is false.
The Truth About Claiming
The truth is this: If an individual claims Social Security at age 62 rather than waiting until full retirement age (which varies by birth year), the person can expect up to a 30% reduction in monthly benefits. For every year the individual delays claiming Social Security past FRA up to age 70, the person gets an 8% increase in benefits. So, if an individual starts receiving retirement benefits at age 67, the person will get 108% of the monthly benefit. If the individual waits until age 70, the person will receive 132% of the monthly benefit.
Costly, Yet Common, Knowledge Gaps
According to the survey, other common knowledge gaps include:
– Half of those not already receiving Social Security (51%) don't have a clear sense of how much they will receive in Social Security income.
– More than half of current beneficiaries (55%) don't know what percentage of their pre-retirement income Social Security is replacing.
– Nearly a third of all of the respondents (30%) don't know that Social Security may offer benefits for spouses and children.
– More than a third (37%) incorrectly believe that Social Security benefits are not protected against inflation.
