Many individuals nearing retirement age anticipate that Social Security will serve as their primary source of income once they cease working. However, a recent survey conducted by MassMutual reveals a concerning lack of understanding among this demographic regarding the program’s regulations and entitlements.
In the survey, which involved 1,500 respondents aged 55 to 65, participants were subjected to a 13-question true/false quiz about Social Security. Alarmingly, 78% of them either failed or just barely passed the assessment.
This breakdown comprised 41% who failed and 37% who received a grade of D. Impressively, less than 1% managed to achieve a perfect score, answering all questions correctly.
This year’s respondents performed even worse compared to 2023, with 69% failing or barely passing the quiz.
A solid grasp of Social Security intricacies is crucial in avoiding potentially detrimental mistakes. While most respondents correctly understood that claiming benefits before their full retirement age would result in a reduction, only 48% knew that there’s no added benefit to delaying benefits past age 70.
According to David Freitag, a financial planning consultant and Social Security expert at MassMutual, being aware of one’s full retirement age, the point at which they can receive 100% of their earned benefits, is pivotal in making informed claiming decisions. Nonetheless, nearly half of the near-retirees (45%) are unaware of the current full retirement age, which typically ranges from 66 to 67 depending on birthdate.
With a surge of baby boomers set to turn 65 in the coming years, commonly called the “silver tsunami,” understanding key milestones like age 65 for Medicare eligibility and the varying full retirement ages for Social Security is imperative. Freitag emphasizes the importance of making Social Security claiming decisions within the window of age 62 to 70 to avoid costly errors.
In addition to Social Security, age 65 carries significance due to potential Medicare penalties for delayed enrollment. Freitag advises individuals to anchor their retirement planning around decisions regarding health insurance and Social Security claiming.
Despite the widespread lack of Social Security knowledge among near-retirees, 40% still anticipate it will constitute their primary income source in retirement, followed by 401(k) or 403(b) plans (17%), pensions (13%), and investments (11%). However, a concerning 44% admit they are uncertain about the percentage of income their Social Security benefits will replace.
