Factors Affecting Social Security Income Largely Misunderstood

New survey findings suggest a need for financial advisers to discuss optimizing Social Security benefits with their clients, as many do not understand what factors determine their benefits.

In fact, Nationwide Retirement Institute’s survey of 252 financial advisers finds that only 25% of respondents believe a vast majority of their client base (more than 80%) understand the factors that will affect their Social Security income.

And while 54% of adviser respondents are confident in their clients’ plans to help them live comfortably in retirement, 62% report that determining when to collect Social Security is a frequent concern expressed by their clients.

Add to the mix a recent consumer survey by Nationwide that found that 88% of older adults do not know what factors determine the maximum Social Security benefit an individual can receive, and 63% of future retirees acknowledge they are not confident in their knowledge of Social Security.

However, the survey also revealed that only 13% of respondents have discussed Social Security with a financial adviser. And among those who were counseled by their adviser on the topic, 40% of respondents said they personally initiated the conversation.

“Advisors can easily build trust and relationships by starting the Social Security conversation,” suggests Ron Ransom, senior vice president of integrated relationship strategies for Nationwide. “Social Security is a universal benefit and a primary source of retirement income for many. However, it’s often overlooked in the planning process.”

Meanwhile, the adviser survey shows that most respondents (83%) believe their clients expect them to give advice on Social Security and 42% believe their clients would likely find another adviser if they did not help with optimizing Social Security benefits.

And it appears that consumers would tend to agree with that assessment. According to the findings, 72% of future retirees currently working with a financial adviser say they would likely switch to an adviser who can help maximize their Social Security benefits.

Less Than Expected

Meanwhile, the consumer survey shows that more than a quarter of U.S. adults (27%) in retirement say their Social Security payment is less than they expected. In addition, 26% of future retirees daid they believe they can live comfortably in retirement on Social Security alone.

Those working with a financial adviser, however, report receiving over 20% more in Social Security benefits than those who don’t ($1,500 vs $1,234). Moreover, those working with a financial adviser were more likely to say they were able to do the things they wanted in retirement (83%), compared to those not working with an adviser (55%).

Nationwide suggests there is an opportunity for advisers to help consumers understand the Social Security program, as many older adults think they are eligible for Social Security benefits sooner than they actually are, including 57% of future retirees. Future retirees also expect to receive $1,628 on average as a monthly payment from Social Security, but that’s nearly 30% more than what current retirees say they collect ($1,257).

The survey of 252 financial advisers with at least 50% of their clients having total investable assets of $250,000 or more was conducted online by the Harris Poll on behalf of Nationwide from Oct. 16-26, 2017. The consumer survey was conducted online from Jan. 22 to Feb. 5, 2018, among 1,013 U.S. adults aged 50 or older who currently collect or plan to collect Social Security benefits, and plan to retire within the next 10 years, retired within the last 10 years or retired more than 10 years ago.

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