For Million Future Retirees, Social Security Will Be The Main Source of Retirement Income
Nearly two in three (63 percent) future retirees admit they are not confident in their knowledge of Social Security – and it shows, according to the results of a new survey from Nationwide.
A quarter of U.S. adults (27 percent) in retirement say their Social Security payment is less than expected, and one in four (26 percent) future retirees believe they can live comfortably in retirement on Social Security alone.
The fifth annual survey from the Nationwide Retirement Institute®, conducted online by The Harris Poll among 1,013 U.S. adults ages 50 or older who are retired, or plan to retire in the next 10 years, finds that over half (55 percent) say Social Security will be their main source of retirement income, followed far behind by just 18 percent of older adults relying on their pension.
“It’s problematic that so many people are planning to rely solely on Social Security for income in retirement,” said Tina Ambrozy, president of sales and distribution at Nationwide. “There’s a major disconnect between what consumers think their Social Security benefit will be – and cover – compared to reality.”
Eligibility and benefit misconceptions
Most older adults think they are eligible for Social Security benefits sooner than they actually are, including 57 percent of future retirees.
Most older adults not currently collecting Social Security (53 percent) don’t plan to start collecting early, with future retirees expecting to collect Social Security benefits at age 66, on average. Despite those plans, the most common age at which retirees start collecting Social Security is 62 – the earliest age a person can do so. 1
Future retirees also expect to receive $1,628 on average as a monthly payment from Social Security. However, that’s almost 30 percent more than what current retirees say they collect ($1,257).
There are also key differences between how future retirees anticipate spending their Social Security compared to how current retirees actually do.
Four in 10 (41 percent) older adults do not expect to spend any of their Social Security income on health care, yet 58 percent of recent retirees report spending their benefit on health care.
Tools for maximizing benefits
Concerningly, nearly nine in 10 (88 percent) older adults don’t know what factors determine the maximum Social Security benefit an individual can receive.
“One of the best ways people can understand what their benefits will cover, and how they can maximize them, is by consulting a professional for advice,” Ambrozy added.
However, only 13 percent of older adults say they have a financial advisor who provides them Social Security advice.
It’s not that they don’t want the advice. In fact, nearly three in four (72 percent) future retirees currently working with a financial advisor say they would likely switch financial advisors to work with an advisor that can help them maximize their Social Security benefits.
It’s easy to see why. Those working with a financial advisor report receiving over 20 percent more in Social Security benefits than those who don’t ($1,500 vs $1,234).
Plus, those working with a financial advisor are much more likely than those not working with an advisor to say they were able to do the things they wanted in retirement (83 percent vs 55 percent).
Most current retirees getting Social Security (62 percent of recent retirees and 66 percent of those that have been retired for more than 10 years) relied on the Social Security Administration prior to retiring to identify their maximum monthly benefit.
However, Social Security filing strategies are more effective when highly personalized. It’s important to consider working with someone who knows you and your retirement goals.
To help advisors start conversations with clients about important claiming decisions, Nationwide’s free Social Security 360 Analyzer provides a comprehensive look at Social Security filing strategies and helps position Social Security in the context of an individual or family’s retirement income needs.
Find out more at nationwidefinancial.com/ssinsights
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