It probably comes as no surprise that ongoing economic fallout from the pandemic, including inflation, market volatility and the threat of a recession, have led millions of Americans to re-evaluate their retirement plans. New research from the Nationwide Retirement Institute® shows that two-thirds of Americans (66%) say they worry more now than they did before about their retirement income— that’s a 10-point increase from 2021!
In volatile moments like we’re experiencing, it’s easy to make emotional decisions with lifelong implications. Unfortunately, misconceptions about Social Security, which forms the foundation of almost every American’s retirement income strategy, are all too common, according to the survey. The good news is with the right advice from a trusted financial professional, you can avoid unintended consequences that may come with an uninformed decision.
What People Are Getting Wrong About Social Security
About half (49%) of consumers believe if they file for Social Security early, their benefit will automatically go up once they reach their full retirement age — it won’t. A sizable number of boomers (39%) who are not currently receiving Social Security plan on drawing from their benefits before their full retirement age, a decision that may cost them in the long run and should only be done with eyes wide open about implications for the future.
Misperceptions like this could make a huge difference in maximizing your retirement income. That’s why I think it’s important that even the savviest retirement savers should involve an adviser or financial professional in their Social Security decision-making process.
While 91% of survey respondents said they’re at least somewhat confident in their Social Security knowledge, only 7% could identify the factors that determine a maximum benefit, including:
- Work history. Your benefits are based on average indexed monthly earnings during the 35 years in which you earned the most.
- Age. While you can start receiving benefits as early as age 62, you are not entitled to your full benefit until you reach your full retirement age, which varies based on birth year, and to get the maximum benefit you would have to wait until age 70.
- Benefit break-even age. If you begin receiving benefits before your full retirement age, you’ll receive a smaller benefit for a longer period; if you wait until your full retirement age or later, you’ll receive a larger monthly benefit for a shorter period. For those who wait to take benefits, if you live long enough, there comes a point when your total benefits will surpass the total you’d get by starting them earlier. That’s the Social Security break-even age.
- Marital status. The maximum …….