Pre-retirees, those within 10 years of retiring, expect they will receive $1,805 a month in Social Security benefits, but retirees actually collect an average of $1,408, a 28% difference, according to the sixth annual survey by the Nationwide Retirement Institute. Twenty-six percent believe they can live comfortably on Social Security alone, and 44% say that it will be their main source of retirement income.
Seventy percent think they are eligible for full benefits before they actually are. On average, they incorrectly think they will be eligible for full benefits at age 63, and 26% think that even if they claim early and receive lower benefits, these benefits will rise once they reach full retirement age.
On average, retirees say they began collecting Social Security at age 62. The reason they gave for taking Social Security benefits early were to pay for living expenses (61%), to supplement their income (36%), or because they faced health issues (22%).
Future retirees plan to begin collecting benefits at age 65, thereby forgoing higher Social Security benefits were they to wait until age 70. Recently, a professor at the UCLA Anderson School of Management discussed biases that discourage employees from waiting to claim Social Security and potential messaging to address those biases.
“Social Security is one of the most confusing retirement topics that America’s workers are facing today,” says Tina Ambrozy, president of sales and distribution at Nationwide. “Our survey reveals that fewer than one in 10 older adults know what factors determine the maximum Social Security benefit an individual can receive.”
Sixty-six percent of future retirees worry about Social Security running out of money in their lifetime. Forty percent think there will be cuts under the current administration, and 83% think the Social Security system needs to be reformed.
Among those who recommend changes to the Social Security system, 53% think higher earners’ taxes should increase. Even those with more investable assets agree. Fifty-five percent of those with $250,000 or more and 48% of those with $1 million or more believe higher earners’ taxes should increase.
“Many people feel the best way to improve the Social Security program is to raise taxes on high earners to increase funding,” Ambrozy continues. “Interestingly, our survey reveals that 69% of future retirees were surprised to find out a person making $150,000 a year pays as much in Social Security taxes as millionaires.”
Only 22% of future retirees have a formal, written retirement plan, and 33% say they did less Social Security planning because it is too confusing.
Among those working with an adviser who have not received advice on Social Security, 34% say they expect to receive such advice. Seventy-six percent say that if their adviser did not speak with them about maximizing Social Security benefits, they would switch advisers.
The Harris Poll conducted the online survey for Nationwide in February among 1,315 adults.