Social Security: Benefits Protected Against Inflation, But Majority of Americans Remain Unaware
The recent four-decade high inflation — combined with market volatility and fears of a looming recession — are taking a toll on Americans, with 66% of respondents now worrying more (than they did before) about their retirement income, per a new survey. In addition, more than two-thirds of Americans polled don’t realize that Social Security is protected against inflation.
The Nationwide Retirement Institute’s ninth annual Social Security Consumer Survey found that a staggering 70% of Americans worry that Social Security will run out of funding in their lifetime, with 33% not currently receiving Social Security benefits believing they won’t get anything when they retire.
The survey also finds that most Americans are misinformed about Social Security: Only 7% correctly identified all the listed factors that determine the maximum Social Security benefits an individual can receive.
“Every year we find that all generations need more Social Security education, but in this uncertain economic environment it’s more important than ever for people nearing retirement to understand that their Social Security benefits are protected against conditions such as inflation,” Tina Ambrozy, senior vice president of strategic customer solutions at Nationwide, said in a press release. “There is an immediate opportunity for financial professionals to clear up clients’ misconceptions about Social Security to alleviate their fears and help them stay on track toward their long-term retirement goals.”
Additional misconceptions include 49% of adults polled not knowing (or not being sure of) what percentage of their income is — or will be — replaced in retirement by Social Security; only 13% of respondents correctly guessing their full retirement age based on their year of birth; and 40% of those surveyed mistakenly believing that, if they file early, their benefit will automatically go up once they reach their full retirement age.
“It’s understandable that people are worried about retirement in the face of the current economic environment,” Ambrozy added in the release. “Individuals at all stages of their careers can benefit from educating themselves about the Social Security system and retirement planning and a trusted financial professional can help with that education.”
Many Eye Taking Benefits Early, But This Could Be Costly
In turn, these worries are pushing Americans to tap into their benefits early. A full 26% of baby boomers who are not currently receiving Social Security plan on filing for benefits early while continuing to work, per the survey, while 39% of baby boomers who are not currently receiving Social Security plan on withdrawing their benefits before their full retirement age.
The Social Security Administration (SSA) reminds Americans, however, that claiming benefits early could cost them money. “If a worker begins receiving benefits before his/her normal (or full) retirement age, the worker will receive a reduced benefit. A worker can choose to retire as early as age 62, but doing so may result in a reduction of as much as 30%,” the SSA says.
On the contrary, starting to receive benefits after normal retirement age may result in larger benefits, as with delayed retirement credits, a person can receive his or her largest benefit by retiring at age 70, according to the SSA.
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