Americans may have faith in the Social Security system, but many still don’t really understand how it works.
That’s a key take-away from a recent survey of Americans’ knowledge of Social Security retirement benefits. While 63 percent of respondents said they do believe Social Security benefits will be available to them when they retire, many were confused about who qualifies for benefits, how much they’ll be eligible to receive, and when they can start drawing benefits without penalty.
The survey, by Massachusetts Mutual Life Insurance Company (MassMutual), included a true/false quiz about Social Security facts. Just 28 percent of those surveyed scored a passing grade, and only one person out of the 1,500 polled was able to answer all survey questions correctly. The survey results illustrated a significant lack of knowledge about Social Security, including:
* Although 75 percent of those surveyed thought being an American citizen is a requirement to receive Social Security retirement benefits, this is not the case. Non-citizens lawfully living in the U.S., and who have permission to work here, can obtain a Social Security number, pay into the Social Security system and draw benefits.
* More than seven in 10 respondents mistakenly thought that 65 is the age when everyone can begin drawing full retirement benefits. Actually, your full retirement age depends on what year you were born.
* Fifty-five percent of those surveyed incorrectly believed they could continue working during retirement while collecting full Social Security benefits, regardless of their age. If you work during retirement, but have not yet reached your full retirement age, your Social Security benefits may be reduced if you earn too much. Once you reach full retirement age, those withheld benefits will be repaid over your lifetime.
“Perhaps the greatest Social Security deficit in this country is the lack of education around the retirement benefits of the program,” says Michael R. Fanning, executive vice president, U.S. Insurance Group, MassMutual. “With millions of Americans nearing retirement each year, many may be at risk of underutilizing a critical component of their retirement income stream.”
Still, some good news emerged from the survey. Americans seem aware that Social Security should be only one component of their overall retirement savings plan. Just 39 percent said they expected to rely more on Social Security than their personal savings or income during retirement, and just 15 percent expected to rely solely on Social Security.
You can test your Social Security knowledge by taking the MassMutual quiz.
Here are some Social Security facts to help improve your knowledge:
* No single filing strategy works for everyone filing for Social Security benefits; there are just too many variables. For example, a married couple may have hundreds of options for filing for Social Security retirement benefits.
* Americans are living longer. It’s no longer sufficient to plan for just 10 years of retirement. You may well need savings and income to carry you for three decades or longer.
* While Social Security can be an important component of your retirement plan, you need to have other income as well. Under- or over-valuing your Social Security retirement benefits could keep you from getting a true picture of your retirement savings plans. A qualified financial professional can better help you understand how Social Security fits into your personal situation.
For additional information on saving for retirement and Social Security benefits, visit MassMutual.com/SocialSecurity or the Social Security Administration.