By David Dankwa
Knowledge of Social Security benefits and other offerings of the nation’s most important retirement program varies widely among middle-income Americans who are nearing retirement, according to a recent survey.
For example, of the 500 people that participated in the survey by Bankers Life’s Center for a Secure Retirement, nearly half – or 47 percent – incorrectly believe that an annual cost-of-living increase to their Social Security benefit is guaranteed.
“We found huge gaps in the understanding of Social Security or a lack of understanding on how the program works,” said Jennifer Born, a spokeswoman for the Center for a Secure Retirement.
Born told InsuranceNewsNet that the survey showed a higher number of respondents -- 36 percent -- falsely believe that full Social Security benefits start with their 65th birthday. Also, one out of three respondents did not understand that delaying when Social Security benefits are collected can increase their future benefit amount.
“We need to encourage people to consider delaying Social Security benefits for as long as they can,” she said. “If you hold off collecting your benefit, the amount you will be taking out increases.”
According to the Social Security Administration, if you were born between 1943 and 1960, the age at which full retirement benefits are payable increases gradually to age 67.
People born in 1946 or earlier are already eligible for full Social Security benefits. When a person chooses to delay receiving benefits beyond full retirement age, his benefits increase by a certain percentage depending on the year of his birth.
Currently, roughly 57 million people receive monthly benefits – about 40 million of them are retirees and their families. The retirement program was never meant to be the only source of income for people when they retire, but rather to supplement about 40 percent of an average wage earner’s income after retiring. Unfortunately, financial advisors estimate that retirees will need about 70 percent or more of pre-retirement earnings -- from private pensions, savings and investments, among other sources -- to live comfortably.
Among the people surveyed by the Center for a Secure Retirement, 72 percent said Social Security Benefits make up at least half or more of their retirement income, which exceeds the national average of 65 percent. In fact, 29 percent stated they count on Social Security for 75 percent or more of their retirement income.
Born said the Center for a Secure Retirement, based on its own research, recently came up with five key recommendations to guide retirees who are looking to enjoy their golden years. Among the top recommendations is for people to start saving early and to work as long as they are able.
“Practice healthy living -- eat right and see your doctor regularly,” she said.
Also, people nearing retirement should consider delaying Social Security benefits for as long as they can and to begin a conversation about longevity with a professional advisor who can help them navigate that decision, Born said.
In addition to the gaps in knowledge of Social Security benefits, the survey showed some middle-income Americans are not paying attention to their individual Social Security statements. For instance, 35 percent of those who are yet to receive Social Security do not know what their monthly benefit amount will be when they retire.
Also, a high number of the survey respondents -- 78 percent -- stated they are concerned about the future of Social Security and 38 percent stated they do not believe that the benefits as we know them will exist in 20 years.
David Dankwa is a longtime business reporter with significant experience writing about the global insurance industry. Contact him at [email protected].
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