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Many Near-Retirees in the Dark About How Social Security Works

Retirement Income

One of the biggest decisions upon retirement is deciding when to claim Social Security, yet a surprising number of near-retirees still lack even basic knowledge about how the program works. 

According to MassMutual’s latest Social Security retirement benefits quiz of near-retirees (age 55 to 65), two-thirds of near retirees barely passed or failed the quiz. In fact, nearly 30% of respondents failed, meaning they answered six or more questions out of 13 incorrectly, while 36% earned a grade of D, meaning they answered either four or five incorrectly. Only 1% of respondents received an A+ by answering all 13 true/false statements correctly.  

MassMutual first conducted a consumer poll of near-retirees about Social Security retirement benefits in 2015, when 62% of those age 50 or older failed. Since then, the results have gotten only slightly better: the failure rate was 47% in 2018, 33% in 2020 and 35% in 2021. 

In reviewing the latest findings, it’s clear that respondents are more knowledgeable about certain areas. For instance, 89% correctly answered that if they take benefits before full retirement age, in most cases, their benefits will be reduced for filing early. Similarly, 82% correctly answered that if they are receiving benefits before their full retirement age and continue to work, their benefits might be reduced based on how much they make. 

In contrast, 44% answered incorrectly that full retirement age is 65 no matter when they were born. Similarly, 51% answered incorrectly that if they delay taking Social Security benefits past the age of 70, they will continue to get delayed retirement credit increases each year they wait. 

When asked whether their retirement income plans account for inflation and market volatility, only 17% said yes, while 28% said no, 28% said “I hope so,” and 26% said “I have no idea.” In addition, 42% say their retirement income can sustain them for no more than 10 years. 

“Now’s the time for retirees to take action,” says Mike Fanning, head of MassMutual US. “Headwinds facing retirees today are plentiful: Inflation. Market volatility. Potential cuts looming for everyone collecting Social Security retirement benefits by 2035. The list grows every day and near retirees have an opportunity to make a difference now to better prepare them for 10, 20, 30 or more years in retirement.”

Spousal Benefits

MassMutual observes that benefits for married couples still confuse many. More than a quarter of respondents (28%) did not know that if they have a spouse, that spouse can receive benefits even if he or she has no individual earning history. 

In addition, 32% of near-retirees did not know that if they have a spouse and that spouse dies, the surviving spouse will not receive both their full benefit and their deceased spouse’s full benefit. Nearly 6 in 10 (57%) do know, however, that if they get divorced, they might be able to collect Social Security benefits based on their ex-spouse’s Social Security earnings history.

While this topic was not part of the latest quiz, MassMutual notes that another Social Security benefit that parents and legal guardians of a dependent adult child with a disability should be aware of is that when the parents retire, the child may be eligible to receive an amount equivalent to approximately 50% of their Social Security retirement benefits—with no impact to the amount they receive. Moreover, when parents and legal guardians pass away, the dependent adult child with a disability may be eligible to receive approximately 75%, up to certain limits.

“It’s more important now than ever to know the basic facts and to secure more guarantees in retirement,” emphasizes Paul LaPiana, head of product with MassMutual. “For example, consider having your retirement income in diversified buckets, some guaranteed and some market dependent. Think about Roth IRAs, Roth 401(k) plan contributions, whole life insurance and annuities,” he says. 

The findings are based on an online poll conducted by PSB Research from April 4–7, 2022, among 1,500 Americans nearing retirement (age 55-65) who have not filed for Social Security retirement benefits.

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