Many Americans have long relied on Social Security to help them plan for their retirement. However, according to Allianz Life’s Annual Retirement Study, a significant number of people are unsure about the role of Social Security in their financial future.
This uncertainty spans generations, with many concerned about Social Security’s future solvency and how it will fit into their overall retirement plans.
The study, which surveyed 1,000 people, identifies knowledge gaps about Social Security. A common theme emerged from the responses: many Americans do not understand how Social Security benefits will affect their retirement plans.
Although it is understandable that younger generations have not yet given much thought to Social Security, the data show that millennials and Generation X are especially uninformed. Specifically, 60% of millennials and 51% of Generation X participants admitted to having a limited understanding of Social Security.
In comparison, only 23% of baby boomers over 60 reported the same level of uncertainty. This suggests that older generations are more familiar with how the system works, whereas younger workers may not have had the opportunity to learn about it yet.
Americans unsure about when to claim Social Security
One of the study’s key findings is that many Americans are unsure about the best time to claim their Social Security benefits. Timing is critical because it affects the total amount of money a person receives during their retirement.
According to the survey, 53% of respondents, including 57% of millennials and 56% of Gen Xers, are unsure when to begin claiming their benefits. Even among baby boomers, nearly a quarter (23%) said they didn’t have a plan for when to start claiming Social Security.
However, the study discovered that the vast majority of baby boomers—71%—have a strategy in mind, demonstrating that, while there is still uncertainty, many in this generation are taking proactive steps toward retirement planning.
Another major concern among Americans is the possibility that Social Security will not be available during their retirement. The study found that 57% of respondents were concerned about the program’s long-term viability.
This fear may prompt some people to seek alternative sources of income, as relying solely on Social Security will most likely not be sufficient to maintain their current standard of living after retirement. Even those who have planned to maximize their benefits will need to consider additional income streams in order to maintain financial stability.
Social Security quirks people don’t know
The study also revealed some common misconceptions about Social Security that could have serious financial consequences. A common misconception is that if one spouse dies, the surviving spouse will continue to receive both their own and the deceased spouse’s benefits. In reality, the surviving spouse will only receive one benefit, usually the larger of the two.
Furthermore, many people are unaware that Social Security benefits can be taxed based on a person’s total income. Another issue arises when people choose to claim benefits before reaching the full retirement age. If they continue to work, they may notice that some or all of their benefits are reduced or “clawed back.”
All of these misconceptions are dangerous when it comes to ensuring financial security in retirement. The first step in ensuring that your finances do not suffer during retirement is to obtain accurate information.
Believing that you will receive more money than you are entitled to is one of the quickest ways to deplete your savings with no backup plan. This is why these studies are so important: they ensure that institutions are aware of the topics on which the American public should be kept informed and educated more thoroughly.