Deciding when to claim Social Security benefits has significant financial ramifications for retirees, but a new poll finds that a striking percentage of near-retirees still lack even basic knowledge about how the program works.
According to the latest MassMutual Social Security consumer poll, more than a third (35%) of near-retirees (age 55 to 65) failed a basic knowledge quiz about Social Security retirement benefits and another 18% of respondents earned a grade of D. Only 3% of respondents received an A+ by answering all 12 true/false statements correctly.
The first time MassMutual conducted a similar consumer poll in 2015, 62% of those age 50 or over failed. In 2018, 47% failed and in 2020, 33% failed. Even more startling, according to MassMutual, is that more than a quarter (26%) of individuals age 60 to 65 have no idea of the full retirement age.
One bright spot is that a large majority (83%) of respondents are very knowledgeable about the consequences of receiving Social Security benefits before reaching their full retirement age. Nearly all (94%) respondents know that if they take benefits before full retirement age, their benefits will be reduced because of filing early, while 86% know that if they receive benefits before their full retirement age and continue to work, their benefits may be reduced based on how much they make.
“Today, Social Security is the primary guaranteed retirement income stream for Americans, besides pensions and annuities,” notes Paul Lapiana, head of MassMutual U.S. product. “For those looking to maximize their retirement income stream, one option is to depend on an annuity to fill the gap and hold off filing for Social Security to grow delayed retirement credits and receive the largest possible benefit for life.”
MassMutual also found that a few Social Security topics increased in interest during the pandemic:
- Zeros on a Social Security statement. Given the negative impact of the pandemic on businesses and jobs, and increased needs for caregiving of children and aging relatives, some will be coming out of the pandemic with zeros or greatly decreased earnings cited on their Social Security statements—a.k.a. “the green line form.” MassMutual notes that since retirement benefits are based on the top 35 years of earnings, if 35 or fewer years is all a person can show, this could negatively impact their benefits for life.
- Survivor benefits. There was a lot of interest in learning the facts about survivor benefits, with 22% not knowing that it is not true that if a spouse passes away one can receive both their and their spouse’s full benefits.
- Divorcee benefits. MassMutual notes that many were wondering about the impact of a divorce on Social Security retirement benefits. Nearly one third (30%) of respondents did not know that a divorced person might be able to collect Social Security benefits based on an ex-spouse’s earnings history.
“As with most things in life, knowledge is power, and choices should be made on purpose and not by accident,” emphasizes David Freitag, a financial planning consultant with MassMutual and long-time Social Security expert. “With Social Security, there are a lot of options to consider. Make the wrong choice, and you will be leaving money on the table for the rest of your life.”
The online poll of 12 true/false statements was commissioned by MassMutual and conducted by PSB Research from March 1–9, 2021, among 1,500 Americans age 55-65 who have not filed for Social Security retirement benefits.
