Social Security retirement benefits are crucial to many in retirement, yet many near-retirees don’t know the basics, and it could cost them money in the future, according to a consumer poll1 by MassMutual Life Insurance Co.The five-question Social Security quiz on retirement benefits was failed by nearly half (47%) of Americans age 50+. A survey respondent had to answer four or five correctly to pass.
To compare, MassMutual’s survey four years ago, a 10-question true-false quiz,2 had a 62% failure rate for respondents age 50+. The recent five-question quiz was completed by 1,007 Americans 50+, while the February/March 2015 quiz surveyed 1,513 people in the same age range.
That positive change (51% success up from 38%) indicates an improvement in Social Security benefits knowledge, yet a lot of much-needed dollars are not being claimed. Another survey,3 this one by the Nationwide Retirement Institute, revealed that nearly 90% of near-retirees age 50+ didn’t understand what determines how someone can receive the most Social Security benefits.
Another failure: Not creating a Social Security account online
As part of MassMutual’s survey,1 near-retirees were also asked, “Have you created an account on the Social Security Administration website to view your earnings history to ensure it is accurate now that the administration no longer mails statements to people under the age 60?”
“No” was answered by 86% of people age 50-59; they have not yet created an account. “No” was also answered by 60% of the total survey respondents, everyone age 50+. Why is this an issue? Establishing an account helps near-retirees know if the Social Security Administration has correctly and accurately calculated retirement benefits. It also provides peace of mind that identity theft hasn’t occurred. Near-retirees can see that only one account is opened under their Social Security number.
Some Social Security info near-retirees may not know
The Social Security Administration bases benefits on indexed earnings, but only the top 35 years. Earnings records are reviewed every year someone works, even if he/she has reached full retirement age or has claimed benefits. So, future benefits could increase if earnings are higher than one of the previous years being used in the calculation.
Currently, the annual taxable wage base is $132,900. Only earnings up to that amount will count toward future Social Security benefits.
When someone continues to work beyond traditional retirement age (66 or 67 for most), there’s a substantial boost in future Social Security benefits. For example, if someone were to work until age 70 and earn more in the preceding eight years than at any other time in his/her life, the Social Security Administration would remove the lowest earning eight years from that person’s top 35 to calculate the benefit, resulting in a higher monthly benefit.4
The longer someone delays in taking Social Security benefits, the higher the monthly benefit. This is really the best way to increase retirement income, particularly if adequate retirement assets have not been saved.
We’re sure you can ace the five-question quiz, but many of your clients can’t. While maybe you’re surprised by how many near-retirees don’t understand the basics of Social Security retirement benefits, it’s also an opportunity for education and positive change.
As you know, there’s much more to a successful retirement than Social Security. Our Step by Step Guide to Helping Your Clients Achieve Financial Security and Satisfaction in Retirement offers seven unique ways you can guide clients to embrace their future.
1InvestmentNews, Almost Half of Near-retirees Fail Basic Social Security quiz, May 15, 2018
2MassMutual, Social Security Quiz, March 2015
3InvestmentNews, Future Retirees Expect Social Security to be Main Source of Income, April 2018
4Investor Junkie, How Does Being Employed During Retirement Affect Social Security?, undated