Americans between the ages of 45 and 64 haven't learned the basics about Social Security—and that ignorance has a severe impact on both their benefits and their retirement decisions.
That's according to a study from the Financial Planning Association (FPA) and the American Association of Retired Persons (AARP).
They surveyed future Social Security beneficiaries 45–64 years old as well as certified financial planners (CFPs).
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Then they compared their levels of knowledge about how Social Security benefits work.
Survey responses indicated that there are substantial gaps in future beneficiaries' knowledge.
These gaps could make them claim benefits too soon to derive the maximum amount possible, or they could fail to claim benefits to which they are entitled.
About half of consumers in the age group surveyed expect that Social Security will serve as a major source of retirement income; 39 percent expect it will make up at least half of their income during retirement.
However, the study said that those numbers are lower than currently exist for beneficiaries already drawing benefits—48 percent of current beneficiaries are depending on Social Security for 50 percent or more of their income, with 23 percent of them receiving 90 percent of their income from those Social Security checks.
Consumers aren't clear about the optimum claiming age, either.
Only 61 percent know that 62 is the earliest they can claim benefits, while nine percent think they can claim benefits earlier.
When it comes to knowing the age at which the full benefit is achieved, they're also not sure.
While 88 percent know that if they wait till full retirement age they'll receive a larger benefit, only 5 percent know how much of a difference that will make.
And only a third know that if they wait till age 70 to claim they'll get the maximum benefit.
CFPs, on the other hand, had different ideas about Social Security.
Only 42 percent said that Social Security would be a major source of income for their clients during retirement, with 53 percent saying that clients wouldn't get more than 30 percent of their income from Social Security.
Ninety-four percent of CFPs said clients wouldn't rely on Social Security for more than half their income.
That's perhaps because a substantial number of CFP clients have multiple sources of income for retirement, including savings, investments, and defined benefit or defined contribution plans.
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