Survey found many
clients would switch advisers to get claiming advice
Apr
25, 2018 @ 10:42 am
More than half of current or soon-to-be
retirees cite Social Security as their primary source of income, well ahead of
the 18% of those who identified a pension as their main income source,
according to a new survey.
But that heavy reliance on Social Security as
the main source of income may be misplaced as thefifth annual survey from Nationwide
Retirement Institute identified some yawning gaps in the public's knowledge
about the program's retirement benefits. The Harris Poll was conducted online
earlier this year among more than 1,000 Americans age 50 or older who are
retired or who plan to retire in the next 10 years.
"It's problematic that so many people are
planning to rely solely on Social Security for income in retirement," said
Tina Ambrozy, president of sales and distributions at Nationwide. "There's
a major disconnect between what consumers think Social Security will be — and
cover — compared to reality."
Three years ago, MassMutual Insurance
conducted its own poll about consumer knowledge about Social Security benefits
and found similarly dismal results. MassMutual plans to release results of its
latest poll soon. In the meantime, advisers may want to test their knowledge
with MassMutual's excellent quiz about Social Security rules or
invite their clients to do so.
More than half of respondents who have not yet
filed for Social Security say they plan to wait until age 66, on average, to
claim their benefits, according to the Nationwide survey. In contrast, most
current retirees claimed benefits at the earliest possible age of 62, resulting
in permanently reduced benefits. Many current retirees said they claimed Social
Security early because they were laid off, were unemployed or had health
issues.
Perhaps that explains why future retirees in the
Nationwide survey anticipate receiving a benefit averaging $1,628 per month,
about 30% higher than the average monthly benefit of current retirees of
$1,257.
The maximum Social Security benefit for
someone who waits until the full retirement age of 66 to claim benefits his
year is $2,788 per month. Those who postpone claiming until 70 can earn delayed
retirement credits worth 8% per year, increasing their benefit by 32% to $3,680
per month.
The Nationwide survey found key differences
between how future retirees anticipate spending their Social Security compared
to how current retirees actually spend their monthly benefit. More than 40% of
future retirees do not expect to spend any of their Social Security income
on health care compared
to 58% of current retirees who report spending their benefits on health care.
The survey results highlighted some severe
knowledge gaps about the nation's retirement program. Nearly nine in 10
respondents — 88% — did not know what factors determine the maximum Social
Security benefit an individual can receive.
"One of the best ways people can
understand what their benefits will cover and how to maximize them is by
consulting a professional for advice," Ms. Ambrozy said.
However, only 13% of older adults say they
have a financial adviser who provides them with Social Security advice. But
it's not that they don't want it. In fact, 72% of future retirees who currently
work with a financial adviser say they would likely switch financial advisers
to work with one who can help them maximize their Social Security benefits.
Those relationships pay off. The survey found
that those working with a financial adviser report receiving Social Security
benefits that are at least 20% higher than those who don't ($1,500 vs. $1,234).
Most current retirees said they relied on the Social Security Administration for
guidance on when to claim their benefits.
"Social Security is undoubtedly one of
the most complex retirement topics facing American workers, and most are likely
unable to grasp the thousands of rules that apply to Social Security," Ms.
Ambrozy said. "Preparing for retirement holistically by working with
advisers and online tools can help adults maximize their benefits and achieve
personal goals."
Nationwide offers a free educational site about
Social Security for financial advisers as well as free access to its Social
Security 360 Analyzer tool. Some of the other leading Social Security software
services available to financial advisers for a fee include Social Security Analyzer, Social Security Timing, Maximize My Social Security and Social Security Pro. Social Security Advisors offers a
concierge service to help advisers' clients with Social Security with their
claiming decisions and filing for benefits.
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