It is the most important source of retirement income for most workers. Yet too many older Americans lack a basic understanding of certain aspects of Social Security benefits.
In fairness, many people got some key questions right in a survey that quizzed them about the program’s rules and incentives. But a significant minority, and sometimes a majority, revealed a poor understanding of several major features of the program. As the researchers note, misunderstanding Social Security benefits could lead to poor financial decisions about retirement.
They analyzed responses by more than 2,300 people – all between ages 50 and 70 – to a nationally representative survey administered online in 2008. The survey, which took about half an hour, started with basic demographic questions before moving to various questions about components of the Social Security program.
Brief explanations of some program features appear below, followed by the percentage of survey respondents who provided incorrect answers, according to the researcher’s analysis of the results:
68 percent were incorrect in their responses to a multiple choice question that included the correct calculation as one of four options.
48 percent believe a non-working spouse is ineligible for spousal benefits.
61 percent of respondents the researchers inferred could benefit from working longer were unaware that their work decision also affects their spouse’s monthly benefit.
When asked about a hypothetical 64-year-old worker (who hasn’t reached the full retirement age), 60 percent of respondents did not provide the correct response – that the individual’s benefits would be withheld at that time.
On the bright side, survey respondents did much better on some questions. For example, about 85 percent accurately said that a hypothetical person between 62 and 70 could increase his monthly benefit by delaying when he begins receiving benefits.
Many Americans nevertheless fail to grasp program features that could have a major impact on their retirement finances.