The findings in a new survey suggest retirement plan professionals need to optimize Social Security benefits with clients, as large percentages of respondents across generations do not have a firm grasp of how the program works.
Nearly half (49%) of U.S. adults aged 18 or older believe that they know how to maximize their Social Security benefits. Yet only 8% correctly identified all the listed factors that determine the maximum Social Security benefits an individual can receive.
What’s more, few know what age they are eligible for full retirement benefits. In fact, only 13% of adults correctly guess their full retirement age based on their year of birth. On average, Americans guessed 60 years of age and Gen Z and Millennials guess 54 and 55, respectively. The correct age is either 66 or 67, depending on the year a person is born.
These findings are contained in the Nationwide Retirement Institute’s 10th annual survey on Americans’ perceptions, concerns and understanding of the Social Security system. This year’s survey reveals how Americans’ attitudes towards Social Security have shifted significantly over the past decade.
Another costly misconception, according to the findings, is that nearly half (49%) of adults don’t know the effect if they file for Social Security benefits early. or mistakenly believe that if they do, their benefits will automatically go up once they reach their full retirement age.
Other key knowledge gaps include:
- About half (51%) of adults do not know or are not sure what percentage of their income is, or will be, replaced in retirement by Social Security.
- More than two in five (42%) of those not currently receiving Social Security are not sure how much their monthly Social Security payments will be once they claim benefits.
- More than two-thirds of consumers (70%) do not know that Social Security is protected against inflation.
Adding to these concerns are some alarming findings that an increasing number of respondents are doubtful that they will receive their full benefits. In this case, Nationwide found that three-quarters (75%) of adult respondents aged 50 or older believe Social Security will run out of funding in their lifetime, up from 66% in 2014.
Additionally, one in five (21%) adults aged 50 or older say they have no source of retirement income in addition to Social Security, up from 13% in 2014. In contrast, 10 years ago, nearly half of respondents (48%) indicated that they had a pension in addition to Social Security, compared to just 31% in 2023.
This year’s survey also reveals how younger generations think about Social Security’s future, finding that Gen Z and Millennials are pessimistic, but plan to take action. To that end, the study found that about two-fifths or more of Gen Z (45%) and Millennials (39%) believe they will not get a dime of the Social Security benefits they have earned.
What’s more, the majority of Gen Z (76%) and Millennials (76%) anticipate they will need to continue working in retirement because Social Security will not pay enough.
“Nearly four out of five Americans say that the Social Security system needs to change, while at the same time our research shows that most people don’t understand how the current system works,” says Tina Ambrozy, senior vice president of Strategic Customer Solutions at Nationwide. “Social Security is a complex system, and it can be difficult to know what you are entitled to. The past 10 years of research have been about providing insights to aid that effort, and while we have made notable progress, we still have work to do.”
About the Survey
The survey was conducted May 18–June 13, 2023, by The Harris Poll on behalf of Nationwide among 1,806 adults who currently receive or expect to receive Social Security, including 300 Gen Z (age 18-26), 500 Millennials (age 27-42), 504 Gen Xers (age 43-58), and 502 Boomers+ (age 59+), and oversamples for a total of 532 Hispanic, 507 Black and 105 Asian adults.
Additional survey findings can be found here.