What’s Your Social Security IQ?

Social Security IQ:
Study shows a huge knowledge gap in understanding Social Security benefits

 

Only 9% of consumers believe they’re very knowledgeable about how Social Security benefits are determined and just 1% of Certified Financial Planner (CFP) professionals say their clients are very knowledgeable about Social Security claiming, according to results of a new joint survey by the Financial Planning Association® (FPA®) and AARP. The survey results reveal a great deal about the enormous knowledge gap consumers, including clients of CFP professionals, face as they determine how to claim Social Security benefits. Although most acknowledge they know little about Social Security claiming, the vast majority of consumers (77%) and CFP professionals (85%) say that maximizing benefits is very important.

Via extensive questioning of consumers and planners, the survey found that although many consumers have some general knowledge about their benefits, CFP professionals can play a valuable role to many future Social Security beneficiaries who could risk leaving thousands of dollars in benefits annually on the table and out of their pockets.

“For families and individuals looking to claim their Social Security benefits soon, this survey shows that far too many face a claiming knowledge gap potentially leaving thousands of dollars on the table,” said AARP President Jeannine English. “We hope that this survey encourages Americans to begin their long term financial planning as soon as possible. This important collaboration with FPA shows that anyone getting ready to claim Social Security may risk losing out if they don’t educate themselves with AARP’s free tools, with the help of a CFP professional, or via other methods available.”

“For consumers to maximize their financial potential in retirement they need to consider Social Security and the important role it plays as one of the primary cornerstones of a sound retirement plan,” says FPA President Ed Gjertsen II, CFP. “Social Security in retirement requires more than just retiring and collecting a monthly check from the government. There are many nuances to Social Security and ways to maximize benefits that, unfortunately, many consumers are not knowledgeable about – and it’s costing them. This collaboration with AARP sheds an important light on this reality and we look forward to working with AARP in the future on making America’s retirees more knowledgeable and secure.”

What consumers think they know and what they actually know:

• Only 9% of consumers believe they’re very knowledgeable, with an additional 38% who believe they are somewhat knowledgeable about how their benefits will be determined.
• Just 1% of CFP professionals believe their clients are very knowledgeable and 31% say their clients are somewhat knowledgeable about claiming Social Security.
• Fewer than 4 in 10 consumers (39%) believe Social Security will make up at least half of their income even though AARP research shows that as Americans age, their reliance on Social Security increases significantly, with nearly 6 in 10 Americans relying on Social Security for at least half of their retirement income after they reach 80 years of age.
• More than 4 in 10 planners (42%) say Social Security is likely to be a major source of income in retirement for their clients.
• 83% of consumers overestimated or underestimated the amount of money they would receive if they waited to become beneficiaries at their full retirement age, with 67% underestimating and 16% overestimating the impact on waiting until full retirement age to claim benefits.
• 80% of those who have ever been married do not know the correct age at which they should claim their own benefits (age 70) if they want to maximize survivor benefits for their widow, with 69% incorrectly believing they could maximize survivor benefits by claiming before age 70 and 11% incorrectly believing they could maximize survivor benefits by claiming after age 70.
• 74% of those who have ever been married don’t know that they need to have been married for a minimum of ten years to collect spousal benefits if divorced, with 39% who incorrectly believe they can collect if married less than ten years, 31% who incorrectly believe they could never collect benefits from an ex-spouse’s work record, and 4% who believe they’d need to be married for 11 years or more.
• About 4 in 10 (39%) consumers didn’t know that 62 is the age they can first claim early Social Security retirement benefits.
• Nearly three in 10 (28%) CP professionals recommend to clients that they wait to claim benefits until age 70, yet only 13% of consumers plan to wait that long.

“Choosing when to claim Social Security is one of the most important financial decisions many Americans will make as they prepare for retirement.” added AARP Chief Public Policy Officer Debra Whitman. “We found that far too many consumers don’t understand the rules of the road, and this is a case where lack of knowledge can have a major impact for the rest of their lives.”

To make sure you’re entirely knowledgeable about your Social Security benefits, visit the official U.S. Social Security Administration website at www.ssa.gov. There, you can also create an account and see your personal estimated benefits and earnings record. It’s important to make sure your earnings record is correct.

 

BLOG Date: Tuesday, October 27, 2015
writer: Ryan Allen