Survey finds misconceptions, health problems and job loss top reasons for not maximizing benefits
COLUMBUS, Ohio–(BUSINESS WIRE)– Many American workers are unprepared for the reality of retirement, often compelled by life events to take Social Security benefits early. According to a new Nationwide Retirement Institute survey, 83 percent of recent retirees started taking their benefits earlier than their full retirement age and those that do receive 49 percent less than those who claim benefits later.*
According to the online survey conducted by Harris Poll on behalf of Nationwide of 902 adults aged 50 or older who are retired or plan to be in the next 10 years, 76 percent of recent retirees who are currently collecting Social Security benefits would not change their decision – and more than half (61 percent) of them say that’s because a life event forced their hand.
More than one in three of those recent retirees who would not change their decision say they filed early because they needed the money (38 percent), because of health problems (30 percent) or because they lost their job (24 percent). Retirees who started getting Social Security early report a lower average monthly payment ($1,174) than those who started at their full retirement age ($1,590) and those who started late ($1,752).*
“Social Security is often a large piece of American workers’ total retirement income, and the decision on when to file shouldn’t be forced on anyone,” says David Giertz, president of distribution and sales for Nationwide. “If handled incorrectly, retirees could be missing out on hundreds of thousands of dollars in retirement income.” 1
Retirement plans versus retirement reality
It’s not just life events that keep people from optimizing their Social Security benefits. Future retirees’ misconceptions about Social Security, their own longevity and their ability to work in retirement can also throw a wrench into their plans.
- More than a third of future retirees (36 percent) plan to work in retirement, but just one percent of those who are retired actually do.
- One in four retirees who plan to draw benefits early (24 percent) say they will do so because they worry Social Security funding will run out before their full retirement age.*
- One in five future retirees (21 percent) say Social Security should be enough on its own to help them live comfortably in retirement. One in four recent retirees have no other source of retirement income (26 percent).
- Future retirees expect Social Security to cover 52 percent of their retirement expenses when in reality it’s closer to 40 percent. 2
- One in five future retirees who plan to draw benefits early (22 percent) say they plan to do so because they don’t think they will live long enough to make it worth optimizing.*
- Only two percent of future retirees expect to get divorced in retirement, but 18 percent of current retirees actually did.
Talk with an advisor
Despite plenty of confusion on the best way to maximize benefits, only 17 percent of all respondents worked with a financial advisor who provided them with advice on Social Security. However, that’s up from 12 percent last year.
Those currently receiving Social Security who have a financial advisor are less likely than those who do not have a financial advisor to say their Social Security payment is lower than they expected (12 percent vs. 27 percent). While one third of retirees without a financial advisor (30 percent) say health care costs keep them from living the retirement they expected, that compares to just 13 percent of retirees with a financial advisor.
“One of the key takeaways of our survey is that Americans need to get professional advice earlier,” Kevin McGarry, director of the Nationwide Retirement Institute, says. “People need to discuss their Social Security options with a financial advisor before a life event renders them unprepared and forces them to take it early.
“The good news is there is a desire to have these discussions with an advisor – more than half of those who have received advice on Social Security (55 percent) started the conversation themselves,” McGarry adds. “We also found that 71 percent of future retirees who work with or plan to work with a financial advisor say they are likely to find or switch to a financial advisor who could show them how to maximize their Social Security benefits.”
The Retirement Institute’s Social Security 360SM program helps advisors find their clients’ optimal Social Security filing options. The program includes a tool with software that compares all the election strategies available to married couples, single people, divorced people, widows, government employees and even those who have already elected a strategy.
The 2015 Social Security Study was conducted online within the U.S. by Harris Poll on behalf of Nationwide between June 15 and June 22, 2015. The respondents comprised a representative sample of 902 U.S. adults aged 50 or older who are either retired or plan to retire in the next 10 years. Data are weighted where necessary on gender, race/ethnicity, region, education, and propensity to be online, to bring them in line with their actual proportions in the population.
Nationwide, a Fortune 100 company based in Columbus, Ohio, is one of the largest and strongest diversified insurance and financial services organizations in the U.S. and is rated A+ by both A.M. Best and Standard & Poor’s. The company provides a full range of insurance and financial services, including auto, commercial, homeowners, farm and life insurance; public and private sector retirement plans, annuities and mutual funds; banking and mortgages; pet, motorcycle and boat insurance. For more information, visit www.nationwide.com.
Nationwide, Nationwide is on your side, Join the Nation and the Nationwide N and Eagle, and Social Security 360 are service marks of Nationwide Mutual Insurance Company.
1 Nationwide Financial Social Security 360 SM Case Study, 2014
2Social Security Administration
*Low base (n<100); results should be interpreted as directional in nature
Charley Gillespie, 614-249-5701