adults flunked several questions about Social Security
in a new survey, but the toughest ones weren’t even on
39 percent of Americans 45 to 64 surveyed by AARP said
Social Security benefits will make up at least half of
their future retirement income, though the advocacy
group says nearly 6 in 10 elderly people rely on the
benefits for half or more of their household income.
than two-thirds underestimated how much their benefit
would increase if they waited until full retirement age
to claim. (The actual amount varies by birth year). Just
five in 100 knew the exact percentage increase they
would get by waiting from age 62 to full retirement age.
among people who are or have been married, 80 percent
didn’t know the correct age to claim in order to
maximize benefits for a surviving spouse after the
primary beneficiary dies. (Generally, the answer is 70,
but an individual’s circumstances might mean that
maximizing survivor benefits isn’t the best course of
the Financial Planning Association polled about 1,200 of
its members who hold certified financial planner
designations about their clients’ Social Security
behaviors. When polled, about half of consumers and
about 40 percent of planners said Social Security will
be a major source of retirement income.
when further pressed to define that, the two groups
parted ways. While 39 percent of consumers said it will
make up more than half of income, 94 percent of advisers
said it will represent less than half of their clients’
income, not surprising given that as a group advisers
tend to work with more affluent people.
what wasn’t on the test? For one, How is a pre-retiree
supposed to choose a claiming strategy among the
millions of possibilities?
reality is this is a test that’s vastly more
complicated than others because of the labyrinth of
Social Security rules.
right answer may not always be the right answer, which
is why I shudder when I hear people give general
advice," said Ed Gjertsen, president of the
Financial Planning Association. Even if beneficiaries
learned all of the millions of permutations involved in
calculating benefits — think age gap and income gap
between spouses, rules about survivors, and situations
where a worker might have spent years in uncovered jobs
— they still can’t make a "correct"
claiming decision because they lack one thing: Knowledge
of how long they’ll live.
you can flip people on their heads and see an expiration
date, you won’t know until hindsight if it was the
right choice," he said. "So you try to do what
you know is the right decision at the right time, not
because your neighbor does it or you think the Social
Security trust fund is running out."
can find benefit calculators online, but make sure it
can handle your particular situation and always double
check your understanding with a local Social Security
office. If you’re getting advice from a professional,
ask about the method used to come up with any strategy,
and run that by a Social Security rep as well.
speaking of the right answer not being the right answer,
that came through in another question asking consumers
about their knowledge of the Social Security earnings
said "42 percent of people (who know their benefits
can be reduced by the earnings test) know that they will
get those benefits back over time."
fact, however, there are situations when that wouldn’t
happen, including widows who switch at full retirement
age or later to take benefits on their own work record.
details of any research report can be spun in any
direction, but the overarching result is not a
surprise," said Marc S. Freedman, a financial
planner familiar with the surveys. "Way too many
Americans are electing to take benefits at 62 and a year
or two in regretting the decision."