Near Social Security claiming age, but can't answer basic Social Security questions

Although more than 15,000 people join the Social Security benefits payment pool each day, two-thirds of them struggle to understand basic facts about the system.

“Now’s the time for retirees to take action,” said Mike Fanning, head of MassMutual U.S., which administered a quiz to near-retirees.  “Headwinds facing retirees today are plentiful: Inflation. Market volatility. The extra Medicare cost added to Part B and Part D premiums included in Social Security retirement benefits. Potential cuts looming for everyone collecting Social Security retirement benefits by 2035. Discussions about changing the age of taking required distributions. The list grows every day, and near-retirees have an opportunity to make a difference now to better prepare them for 10, 20, 30 or more years in retirement.”

This is what the company found when it quizzed Americans who were close to retirement:

• When asked if their retirement income plans account for inflation and market volatility, only 17 percent said “yes,” while 28 percent said “no,” 28 percent said “I hope so” and 26 percent said “I have no idea.”
• Four in 10 did not know that under current law, Social Security benefits could be reduced by 20 percent or more for everyone by 2035.
• Benefits for married couples, including those in same-sex marriages, still confuse many. More than a quarter of respondents did not know that the other spouse can receive benefits even if they have no individual earning history. More than three in 10 did not know that if they have a spouse who passes away, the surviving spouse will not receive both their full benefit and their deceased spouse’s full benefit. However, more than half know that if they get divorced, they might be able to collect Social Security benefits based on their ex-spouse’s Social Security earnings history.
• Although this topic was not part of the quiz, another crucial Social Security benefit that parents and legal guardians of a dependent adult child with a disability should be aware of is that when the parents retire, the child may be eligible to receive an amount equivalent to approximately 50 percent of their Social Security retirement benefits, with no impact to the amount they receive. Furthermore, when parents and legal guardians pass away, the dependent adult child with a disability may be eligible to receive approximately 75 percent, up to certain limits.

“It’s more important now than ever to know the basic facts and to secure more guarantees in retirement,” said Paul LaPiana, CFP, head of product for MassMutual. “For example, consider having your retirement income in diversified buckets, some guaranteed and some market-dependent. Think about Roth IRAs, Roth 401(k) plan contributions, whole life insurance and annuities.”