Survey: Recent retirees regret drawing Social Security when they did
COLUMBUS, Ohio – Unexpected health care costs and other life events have many recent retirees – those retired 10 years or less – wishing they waited to begin collecting their Social Security benefits.
By drawing Social Security too early, many retirees are leaving money on the table that could help.
The third annual Nationwide Retirement Institute® survey conducted online by Harris Poll among 909 U.S. adults age 50 or older living in or approaching retirement finds that about one in four recent retirees (23 percent) would change when they started drawing Social Security to a later age. Of those recent retirees who wouldn’t change, 39 percent of say they were compelled to draw when they did by a life event.
More than a third of current retirees (37 percent) say health problems keep them from living the retirement they expected – and 80 percent of recent retirees say those health problems came earlier than expected. Health care expenses specifically keep one in four current retirees from living the retirement they expected.
“The average American claiming at 62 will spend about 61 percent of their monthly Social Security benefits on health care costs,” said Dave Giertz, president of sales and distribution for Nationwide. “That’s why it’s so important to optimize Social Security. Too many American workers need the money, but are missing out on hundreds of thousands of dollars in retirement income by not maximizing their benefit.”
Future retirees need help
Almost one-fourth of future retirees expecting to receive Social Security (23 percent) either guess or don’t know how much their benefit will be. At the same time, nearly a three in 10 current retirees (29 percent) say their Social Security benefit ended up being less than they expected.
In the new Nationwide survey, future retirees say they expect to get $1,610 in monthly Social Security benefits. While recent retirees report their actual monthly benefit is about $1,378, those who have been retired longer reported receiving just an average of $1,185 per month.
Complicating matters more is that 86 percent of future retirees cannot correctly identify the factors that determine their Social Security benefit amount. As a result, many retirees do not know how to maximize their Social Security and cannot accurately determine their benefit amount.
“Social Security is undoubtedly one of the most complex retirement topics facing American workers,” Giertz says. “Even those who can identify the factors that will impact their benefit are likely unable to grasp the thousands of rules that apply to Social Security. The complexity makes it extremely difficult for retirees to maximize their benefit on their own.”
Social Security tools, financial advisors help bridge the gap
While only 11 percent of current retirees used an online calculator to estimate their benefit, among those approaching retirement, the use of these tools is becoming much more prevalent. Over four in 10 future retirees (42 percent) used a Social Security calculator to estimate their benefit.
The Nationwide Social Security 360 Analyzer provides a comprehensive look at Social Security filing strategies in the context of an individual or family’s circumstances and retirement income needs.
“The development of Social Security calculators is helping to close the Social Security knowledge gap – and combined with the holistic perspective of an advisor, American workers can position themselves to live their dream retirement,” said Kevin McGarry, director of the Nationwide Retirement Institute. “However, we find that this year, even fewer Americans are working with a financial advisor to prepare for retirement. In fact, just 11 percent have talked to an advisor about Social Security.”
Fortunately, those nearing retirement are more likely to have the Social Security discussion. About one-third of future retirees (32 percent) work with a financial advisor – but only half of these (52 percent) say their advisor provided advice on Social Security. It’s not that they don’t want advice. In fact, 76 percent of future retirees who work with a financial advisor – or plan to – say they are likely to switch to one that could show them how to maximize their Social Security benefits.
Retirees who work with an advisor are much less likely than those who don’t to say health problems keep them from living the retirement they expected (25 percent vs. 41 percent) and also are much less likely to say health care costs keep them from living the retirement they expected (11 percent vs. 29 percent).
“It’s no secret that the retirement income landscape, and Social Security, is changing for the next generation of retirees,” McGarry said. “Only 36 percent of the future retirees we surveyed have pensions, compared to 54 percent of recent retirees, and 60 percent of the oldest retirees.
In this new era, Social Security is an even more important component of a worker’s retirement income plan. Working with advisors can help retirees face the challenges posed by lack of savings, longevity, health care costs and other obstacles.”