The pandemic has been a wakeup call for Americans to reevaluate their finances and retirement plan, including how Social Security factors into their long-term retirement goals.
More than two-thirds (68%) respondents to Nationwide Retirement Institute’s 2021 Social Security Survey say it is now more important than ever to optimize their Social Security. This percentage jumps to 80% for Gen Xers and 71% for Millennials.
Similarly, two-thirds of respondents who are not yet collecting Social Security are interested in discussing with a financial professional how to use different income streams to delay filing until they reach full retirement age. What’s more, around half are interested in discussing spousal benefits with a financial professional.
Millennials and Gen Xers are more likely than Boomers to be interested in both of these discussions, at 71% and 70% versus 57%, respectively, for the income stream conversation, and 70% and 61% versus 32%, respectively, for the spousal benefit discussion.
One challenge is that more than half of adults age 25 or over (53%) who work with a financial professional say that person does not provide advice about how and when to file for Social Security benefits. However, two thirds (66%) say they would be likely to switch to a financial professional who could.
“This survey shows us that Social Security is too complex for many Americans to navigate alone, which creates the need for trusted financial professionals to help them determine the best plan for them,” says Tina Ambrozy, senior vice president of Strategic Customer Solutions at Nationwide. “There is an immediate opportunity for professionals to answer clients’ call for help and ensure their strategy aligns with their long-term planning and retirement goals.”
In fact, Nationwide’s survey reveals major gaps in Americans’ understanding of how Social Security works. And while many Americans feel confident in their knowledge of Social Security, that assuredness stands in contrast to their actual understanding of the program.
The study found that 54% of Americans not already receiving Social Security benefits say they know exactly how to optimize their Social Security benefit, yet only 6% know all the factors that determine the maximum benefit someone can receive.
Other common knowledge gaps include:
- Eligibility age: Two in five (39%) don’t know the eligible age to receive full benefits.
- Payments: 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.
- Spousal/child benefits: 30% don’t know that Social Security may offer benefits for spouses and children.
- Inflation protection: More than a third (37%) incorrectly believe that Social Security benefits are not protected against inflation.
- No adjustments: 45% either mistakenly believe if they claim early, their benefits will go up automatically when reaching full retirement age or don’t know this is false.
Americans are also wary of Social Security’s sustainability and may not be taking the time to educate themselves because they don’t think it will exist when they need to claim their benefit. According to Nationwide’s findings, 7 in 10 adults age 25 or over (71%) worry about Social Security running out of funding in their lifetime—especially Millennials (77%) and Gen Xers (83%)—even 61% of Baby Boomers agree with this sentiment.
The COVID-19 pandemic has also altered many respondents’ plans. Nearly one in five (19%) say the pandemic has affected their plans to file for Social Security benefits, with 9% planning to file for it earlier and 11% delaying filing.
“It’s indisputable that Americans across all generations need more Social Security education,” Ambrozy emphasizes. “Unfortunately, failing to close the knowledge gap and correct some of these misconceptions can have costly repercussions. Financial professionals must help their clients understand this bedrock of retirement security in America and plan properly to maximize their Social Security benefit.”
The survey was conducted online by The Harris Poll between April 19 and May 7, 2021, among 1,931 adults age 25 or over, including 627 Millennials (age 25-40), 634 Gen Xers (age 41-56), and 670 Boomers (age 57+).