David Giertz, president of
distribution and sales at Nationwide, says the firm’s second annual survey of
individuals nearing retirement and those who are retired unearthed numerous
misconceptions about Social Security. Retirement is quite different from what
they expected, Giertz tells PLANADVISER. They believe they should take Social
Security early because it’s going to run out. Other misperceptions about the
benefit touch on cost and longevity.
These ideas are contributing to
the retirement readiness crisis the country faces, Giertz believes, and plan
sponsors and plan advisers have an opportunity to help educate participants
about the best ways to claim the benefit. One disconnect—the amount of
retirement income future retirees believe Social Security will cover (52%) and
the reality (40%)—is quite large, Giertz says. One reason for the disparity is
the number of people who began taking the benefit early: 83% of survey
respondents in their retirement years had to claim early because of health
issues or job loss. Those that take the benefit early receive 49% less than
those who wait.
One surprising finding, Giertz
says, was how few of the survey respondents working with an adviser had
conversations with the adviser about Social Security: just 17% versus last
year’s 12%. The number rose slightly but is still low, he says. Coupled with
that figure is the 71% of people who indicated they would seek out another
adviser if their current adviser did not talk about Social Security. While the
number of advisers discussing Social Security did show a slight rise, Giertz
says he expected a bigger increase. But perhaps the scant number of
conversations about Social Security should not be surprising, Giertz concedes.
Two takeaways for plan sponsors
are education and planning. How we can help do a better job educating and
helping people be more aware and after that is planning. The sooner people plan
and understand some of the misconceptions, how to optimize their Social
Security benefit, the better. He recommends plan sponsors outline the
misconceptions for plan participants, along with statistics and follow up with
actions for plan participants to take, such as meeting with an adviser and
devising an appropriate strategy, looking at other assets and perhaps making
withdrawals from a 401(k) in order to delay the beginning of the benefit.
The vast majority take it as soon
as they can—and they don’t realize they’re leaving hundreds of thousands of
dollars on the table if they do that. If people can get assistance getting
through those eight years [age 62 to 70], or even if they just hold on for a
few extra years, it can really help, says Charley Gillespie, communications
consultant for Nationwide media relations.
Nationwide surveyed 902 U.S.
adults online between June 15 and June 22 who currently collect or plan to
collect Social Security benefits. Respondents, age 50 or older, are either
recent or future retirees, or are 10 or more years into retirement.
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