Americans are clueless about Social Security benefits in retirement: Allianz

While 15,000 people join the Social Security benefits pool each day, the majority of Americans have little knowledge about the retirement benefit, according to the 2024 Annual Retirement Study from Allianz Life Insurance Company of North America.

Even though employees can start taking Social Security benefits at age 62 and full retirement age is between ages 66 and 67, depending on birth year, more than half (53%) of Americans say they do not know much about Social Security or how it will fit into their retirement plan, according to the study.

Younger Americans are less likely to know about Social Security – 60% of millennials and 51% of Gen Xers say they do not know much about Social Security or how it will fit into their retirement plan, according to Allianz. Still 23% of boomers who are all over age 60 say they do not know either.

Hispanic respondents (63%) were more likely than Asian/Asian American (56%), white (54%), and Black/African Americans (47%) to say they do not know much about Social Security or how it will fit into their retirement plan.

“It’s worrisome that so many Americans don’t know how Social Security will fit into their retirement strategy,” said Kelly LaVigne, VP of consumer insights, Allianz Life. “Social Security benefits are a foundational part of a retirement strategy. This is a guaranteed source of income for a lifetime that increases with cost-of living adjustments and is tax advantaged. There are decisions to be made around Social Security that will affect you for the rest of your life – making the right choice is important.”

Americans also have unrealistic expectations for their transition into retirement. Even though many younger Americans plan to work past Social Security retirement age, few do. While 41% of millennials and 38% of Gen Xers say they plan to work past Social Security retirement age, just 28% of boomers say they are working past Social Security retirement age.

“Americans are increasingly looking to their employers for insights and solutions to retirement income challenges …” said Deb Boyden, head of U.S. Defined Contribution at Schroders. According to a survey Schroders conducted, Americans have a crisis of confidence in Social Security. Another survey, conducted by MassMutual, found that two-thirds of Americans struggle to understand the basic facts about Social Security.

“Employers can help make their employees who are nearing retirement aware of opportunities to learn more about Social Security benefits,” said LaVigne. “At large companies, they may host periodic sessions for employees about retirement preparation, Social Security and benefits. Employers can also direct employees to learning offerings outside the workplace through community organizations, local libraries or other sponsors.

“Your local Social Security office may have someone who is able to come speak in-person or virtually at an employee meeting. The administrator of your plan, or one of their fund families may also have who could speak to plan participants. Many companies have resources and checklists to help employees through the process of retiring – this is a great place to link to information about Social Security too.”

The future of Social Security/?

Most Americans (57%) worry that Social Security will not be available throughout their retirement, according to Allianz. Younger Americans worry about the future of the benefit. Nearly three in four Gen Xers (73%) and 63% of millennials worry that Social Security will not be available throughout the entirety of their retirement. Just 42% of boomers said the same.

Related: Social Security, Medicare funds will last until 2025, but Congress ‘needs to act’: Report

“Regardless of what happens in the future, Social Security cannot be your entire retirement strategy,” LaVigne says. “For many Americans to retire comfortably, they need additional income along with their Social Security benefit to maintain their standard of living.”

Employers can help their employees prepare for retirement and address their concerns about the future of Social Security in a variety of ways. “Starting early is so important for retirement security, so employers offering a 401(k) program and a match can help get employees on the right track,” said LaVigne. “Employers can also consider what offerings they have in their 401(k) – recent legislation has made it possible to offer guaranteed lifetime income products like an annuity within a 401(k) plan. Many people fear losing Social Security as a retirement income source that cannot be outlived. An annuity offers a reliable retirement income source that can help address those fears.”