Too Heavy Reliance on Social Security for Retirement
Financial advisers agree: your Social Security benefit is only meant to supplement your retirement income, not be the main source. From the CFPs’ perspective, just 31% of their clients are somewhat knowledgeable about the benefit.
They surveyed future Social Security beneficiaries 45-64 years old as well as certified financial planners (CFPs). (A spouse or child getting money on your record usually won’t have lost benefits restored.) That’s a birthday present that keeps on giving.
“Choosing when to claim Social Security is one of the most important financial decisions many Americans will make as they prepare for retirement”, said AARP chief public policy officer Debra Whitman.
That assumption leaves many with less incentive to aggressively save on their own.
It’s easy to see why. According to the report, more than 8,000 strategies are available for married couples alone.
When considering at what age you want to begin receiving Social Security benefits, you should remember that your retirement might last longer than you think. Why married couples can miss significant lifetime sums.
FPA President Ed Gjertsen said in a statement, “Social Security in retirement requires more than just retiring and collecting a monthly check from the government. In it, the two organizations sought to explore how the experiences and knowledge of future Social Security beneficiaries compare with the experiences and recommendations of professional financial planners related to Social Security’s role in retirement income”.
Only half of respondents who’ve been married know they can receive Social Security benefits based on their living spouse’s work history. You can take survivor benefits as early as age 60, but the amount will be reduced based on the number of months remaining before your full retirement age.
This is an opportunity to learn the key concepts you need to know before applying for Social Security.
The good news: Close to 90 percent of those surveyed, know that waiting until their full retirement age of 66 or 67, depending on their year of birth, and gets them a bigger monthly check. Just a third of pre-retirees know that they could max out benefits by waiting to claim until age 70. You don’t get to defer your own retirement benefit and let it grow. Yet, says Jeannine English, president of AARP, “Most people don’t understand the importance of when they claim”.
Such lack of clarity can result in an ex-spouse forgoing a higher benefit (or any benefit at all). Among the consumers, 16% said they had a financial advisor. “What we’re not doing and where the challenge is in connecting that knowledge with individuals that need that information”, Gjersten said.
All too often, however, consumers rely on secondhand information when it comes to making Social Security decisions. The primary source is families and friends (46%), followed by the Social Security Administration (45%), newspaper articles (33%) and financial magazines or books (22%). If you prefer a fewassistance, many professional financial advisors have access to calculators and other planning tools.