How much — or little — you know about Social Security can
have a huge impact on your post-retirement finances. That’s especially true if
you’re among the 64% of Americans with less than $10,000 in retirement savings,
according to a 2019 GOBankingRates survey. What’s more: 46% claimed to have no
savings at all.
A lack of savings was the primary reason Social Security was
founded in the first place. In the height of the Great Depression, many older
Americans were left penniless and without means to retire or even house
themselves. The 1935 Social Security Act ensured that, even if older Americans
had no savings or pension, they’d still have some form of income to help keep
them afloat in their later years.
To better understand how well-versed Americans are about the
ins and outs of Social Security, GOBankingRates polled over 1,000 individuals
on six questions to test their knowledge. Although the respondents were pretty
evenly split between men and women, over 40% were between the ages of 55 and
65-plus, while just 28% were 34 and younger.
A Majority of Americans Don’t Know When You Can Start
Claiming Benefits
Just 30% of respondents gave the correct answer to a
question about the age at which you can start collecting Social Security
benefits. Twenty-three percent of respondents thought you can collect at age
65; nearly 15% placed it at ages 67-72; around 10% thought it was at 58 or 60,
and 23% answered “None of the above.”
It’s a bit alarming that only 3 out of 10 respondents
identified the Social Security eligible age as 62. As one might expect, the
older respondents answered this one correctly more often than the younger
respondents did, and the oldest group had the highest percentage of correct
answers overall.
Although the difference by gender was small, more women
(32%) answered this question correctly than men (27%).
But They Do Know the Average Social Security Benefit
Amount
Respondents fared better on a question about the average
monthly Social Security benefit for retirees, with over 50% choosing the
correct ranges: $1,001-$1,500 and $1,501-$2,000 per month. The actual average
monthly check is $1,514, according to the Social Security Administration.
Older Respondents Fared Better Overall
Respondents ages 65 and older scored highest, with 61%
choosing one of the two possible correct answers, and respondents ages 55 to 64
came in second with around 59% answering correctly.
Incorrect answers among younger respondents suggest that a
good number of them underestimate the average benefit amount; or perhaps
they’re already preparing for Social Security to run out. Among the 18- to
24-year-olds, nearly a quarter thought the average check was under $500 per
month.
Men and Women Were Roughly on the Same Page
Women may have a less optimistic view of what their
retirement years will look like financially, and with good reason. In 2017, the
average monthly Social Security check for a man was $1,503, whereas for a woman
it was only $1,196. This is at least partly explained by the gender wage gap — the
fact that working men tend to make more money than working women, which later
reflects in the size of their Social Security payments.
Although roughly the same number of men and women chose the
correct ranges for an average Social Security check, more women chose the
$1,001-$1,500 option than the $1,501-$2,000 option. Moreover, 24% of women
selected the $501-$1,000 answer, compared to only 13% of men who thought the
same.
Americans Struggle To Sort Out Certain Social Security
Rules
The survey results indicate that there’s a lot of confusion
around how Social Security benefits operate. Many respondents did not
understand how Social Security benefits work for disabled people, or that
Social Security pays evenly between men and women. Additionally, one-fifth of
respondents believed that only one spouse can collect Social Security benefits
at a time.
Many Are Not Quite Up To Speed on Social Security
Disability
Today’s 20-year-olds have more than a 25% chance of becoming
disabled before they reach age 67, the Social Security Administration reported.
However, the 18-24 age group was one of the least likely to know that you can
receive Social Security benefits if you’re disabled as long as you worked in
jobs covered by Social Security. The other age group that lacked knowledge in
this area was 55- to 64-year-olds.
In the event you’re not quite up to speed on this particular
aspect of Social Security disability, no worries — the Social Security
Administration has you covered. Once you reach your full retirement age, your
Social Security disability benefits automatically convert to retirement
benefits, and the amount stays the same. Respondents in the 65 and over age
group scored the best on this question, with 41% of them answering correctly. Slightly
more women than men answered correctly, at 38% and 37.20%, respectively.
Social Security Spousal Benefits Were Also Unclear
An astonishing 43% of respondents didn’t know that you could
receive Social Security benefits in conjunction with your spouse — that is, if
you’ve worked at a job covered by Social Security.
Eleven percent answered that they could receive benefits
even if they’ve never worked at a job covered by Social Security, and another
11% responded that they could receive these benefits at any age. Over one-fifth
of respondents believed they could not receive any Social Security benefits if
their spouse was already receiving them.
Thankfully, this means that 57% of respondents answered
correctly.
Women were a bit more likely to be right about this
question. Over 58% selected the right answer as opposed to 56% of men, and only
18% of them selected the outright “No, I cannot receive any benefits” answer,
as opposed to 24% of men.
Correct answers followed a predictable pattern across age
groups, with 18- to 24-year-olds scoring lowest, with only 42% answering
correctly, and the 65-plus group scoring highest, with 65% knowing the right
answer.
Do Men and Women Receive Different Benefit Amounts?
This question tripped up around 41% of respondents, 5% of
which answered that women made more in Social Security money, and 36% of which
answered that men made more.
The true correct answer is that, with identical earning
histories, the man and the woman will receive the same amount in Social
Security money. The Social Security Administration does not discriminate based
upon gender. However, the same can’t be said for society in general.
A 2020 study on the gender pay gap by PayScale revealed that
women are earning 81 cents for every dollar made by men. This translates to
$900,000 lost on average over a 40-year career; which is actually a much bigger
loss when you factor in the potential interest that could’ve accrued over that
four-decade period.
So even though men and women who earned the same salaries
will make the same in Social Security, men on average do receive larger Social
Security checks than women. In that context, 36% of respondents who answered
“The man” may have been onto something.
Many Believe Social Security Will Never Run Out
When asked what year Social Security is expected to run out,
over one-fifth of respondents answered, “It will not run out.”
This is a troubling belief to possess, given that the Social
Security Administration acknowledges its reserves will be depleted by the year
2037. Other sources, such as AARP, place that time nearer to 2035. Although
this doesn’t signify the total end of Social Security, if taxes stay where
they’re at, beneficiaries will only receive about 76% of their scheduled
benefits.
It may also become harder for the SSA to pony up the money
for retirees if so many working Americans continue to be out of jobs.
Respondents in the 35-44 and 55-64 age groups were the most
correct on this question, with 43% and 42% selecting the right answer,
respectively. Interestingly, almost one-quarter of 55- to 64-year-olds went the
opposite way, answering that Social Security will never run out. Meanwhile, 27%
of those 65 and over believe they don’t need to worry about their Social
Security checks.
As far as gender goes, more men (22%) than women (20%)
believe that Social Security will never run out, and more women gave the
correct answer, although by a very marginal amount.
Americans Need To Brush Up on Their Social Security
Knowledge
Many Americans are woefully unprepared to take full
advantage of the Social Security benefits they’ve earned. And given that 64%
have less than $10,000 stashed in retirement savings, it seems more important
than ever that they understand how Social Security works.
Overall, respondents didn’t have a good grasp on spousal or
disability benefits, and a sizable chunk believed that Social Security will
never run out. Unfortunately, it may come as a shock to them when their benefit
amounts drop by nearly 25% — something currently projected to happen in 2037.
Most concerning was the fact that only 30% of survey takers
knew the age at which they can start receiving Social Security benefits. Unless
Americans want to lose out on this money, they need to educate themselves on
when they’ll be taking Social Security and how much of their income it’ll
represent.
A good way to start is by creating a “my Social Security”
account on the Social Security Administration site. It’s a convenient way for
future beneficiaries to learn more about Social Security and how it fits into
their retirement planning. More importantly, it allows you to view your Social
Security statement and an estimate of your future benefits.
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