More than 70% of American adults worry about the Social Security program running out of money during their lifetime, according to the Nationwide Retirement Institute’s eighth annual Social Security Consumer Survey released Wednesday.
The Covid-19 pandemic has contributed to this pessimistic outlook. Nearly six in 10 Americans (59%) say they worry more now than they did before about Social Security running out of money, according to the online survey of more than 1,900 adults aged 25 and older.
Nearly one in five (19%) say the pandemic has affected their plans to file for Social Security benefits, with 9% planning to file for it earlier and 11% of respondents saying they now plan to claim benefits later.
The fact that the Social Security trustees have yet to issue their annual report on the long-term solvency of the program is not helping matters. It has been over a year since the trustees issued their last report in April 2020, which projected the combined reserves of the retirement, survivor and disability programs would be depleted in 2035 unless Congress steps in before then.
In 2020, the trustees predicted Social Security would be able to pay only 79% of projected benefits from ongoing payroll tax revenue in 2035, potentially resulting in a 21% across-the-board cut in benefits for all beneficiaries less than 15 years from now. But that report didn't reflect the potential impact of the Covid-19 pandemic and Social Security watchers are anxiously awaiting an updated forecast.
The pandemic has been a wakeup call for many Americans to reevaluate their finances and retirement plans, including how Social Security fits into those plans. More than two-thirds of respondents to the Nationwide survey say it is now more important than ever to optimize their Social Security benefits.
Although more than half of Americans who are not already receiving Social Security benefits (54%) say they know exactly how to optimize their benefits, only 6% know all the factors that determine the maximum benefits someone can receive including their average lifetime earnings and the age when they initially claim benefits. Other common knowledge gaps include the eligibility age to receive full benefits, the fact that reductions for collecting benefits early are permanent, or that Social Security benefits include annual inflation adjustments.
“It is indisputable that Americans across all generations need more Social Security education,” said Tina Ambrozy, senior vice president of strategic customer solutions at Nationwide. “Financial professionals must help their clients understand this bedrock of retirement security in America and plan properly to maximize their Social Security benefits.”
Unfortunately, many of the Nationwide survey respondents who work with a financial professional say they have not received any advice about how and when to file for Social Security benefits. Two-thirds of them say they would likely switch to a financial professional who could help them with that crucial decision.
“There is an immediate opportunity for professionals to answer clients’ call for help and ensure their strategy aligns with their long-term planning and retirement goals,” Ambrozy said.
Separately, the Schroders 2021 Retirement Survey released last week found that although 84% of non-retired respondents between ages 60 and 67 understand that the longer they wait to take Social Security, the more they will receive, only 13% say they plan to wait that long to claim benefits. The online survey was conducted in January among 1,000 U.S. consumers ages 45 to 75.
“Social Security is the primary source of income for the majority of Americans we surveyed, which is why we were surprised to see so many decide not to wait until 70 for larger monthly payments,” said Joel Schiffman of Schroders’ North America. “Waiting a few extra years before claiming your benefits can provide a much-need cushion for future expenses.”
While working longer may be a key to security a comfortable retirement, many people, particularly minorities and those without a college education, simply can’t afford to wait to claim their Social Security benefit. Many are forced to retire earlier than planned due to health conditions, triggering early claims for reduced Social Security benefits, according to a new report, “Are Older Workers Capable of Working Longer?” from the Center for Retirement Research at Boston College.
“In thinking of solutions for inadequate retirement savings, working longer may be a fine response for those with more education, but Black and low-education individuals, who are the least likely to have sufficient savings, are also the least well-positioned to work longer,” according to the report.
Of those capable of work at age 50, fully 81% of high-education white men will still be capable of work at age 70, the latest age for claiming Social Security, the report said. In contrast, only 19% of low-education Black men will have that capability.
[Questions about Social Security rules? Find the answers in Mary Beth Franklin’s ebook at Maximizing Social Security Retirement Benefits]
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