The Longevity Equation

Many Americans Appear to Have a Discouraged Outlook on Retirement, But There’s Hope

Social Security limitations, health care costs and planning for expenses contributing to negativity

Columbus, OH – Only 21 percent of future retirees say life in retirement will be better, and 28 percent of recent retirees say life is worse in retirement, according to a new Nationwide Retirement Institute® survey (PDF).

Retirees who say life is worse in retirement cite income (78 percent) and cost of living (76 percent) as the top reasons why.

The 1,012 American adults age 50 or older surveyed online by Harris Poll also are concerned about a variety of possible changes to Social Security – and most aren’t banking on Social Security to last. In fact, 78 percent of future retirees worry that Social Security funding will run out in their lifetime – the highest this sentiment has been in the last four years. Plus, about half of older Americans (52 percent) expect Social Security benefit cuts under the current administration.

A Complex Program

“With growing uncertainty and looming potential changes, Americans in or nearing retirement need help navigating the complexity of the program,” says Tina Ambrozy, president of sales and distribution for Nationwide. “When and how Americans file for Social Security is one of the most important financial decisions they will make in their lifetime.”

Taken as a whole, the survey shows undercurrents in three areas that relate to the broader negativity: future retirees’ expectations differ from current retirement realities, health care costs continue to be a driving concern, and many future retirees do not understand basic elements of the Social Security program, which can complicate appropriate planning.

Future retirees’ expectations differ from retirees

Key differences exist between older Americans’ retirement expectations and the realities of most current retirees, especially as they relate to Social Security benefits. On average, future retirees expect to wait until age 65 to collect Social Security benefits, while most current retirees say they began receiving them at age 62 on average, suggesting a disconnect in planning between the two groups.

For example, future retirees expect to receive $1,578 in monthly Social Security benefits, which is more than the $1,487 average monthly benefits of recent retirees and the $1,308 of those who retired more than 10 years ago.

The differences don’t stop there. Most American adults age 50 or older anticipate spending their benefits on living expenses such as groceries (84 percent) and housing (61 percent). Future retirees expect to spend 29 percent on housing, 23 percent on groceries and 20 percent on health care. However, retirees are somewhat more likely to say they spend their benefits paying health care costs (59 percent) than they do for housing (56 percent).

“Many Americans nearing retirement have misconceptions when it comes to planning for and spending their Social Security, and their assumptions don’t match the reality of how current retirees use their funds,” adds Ambrozy. “Our fourth annual survey uncovers the importance for many of maximizing their Social Security benefits to better prepare for planned – and unplanned – expenses in retirement.”

Health care costs a cause for concern

One-in-three retirees (34 percent) say health problems are interfering with their retirement. Among those who have them, 75 percent say health problems occurred sooner than expected, with most of those (65 percent) saying their health issues emerged more than five years earlier than anticipated. In addition, the expenses associated with health care keep about a quarter of retirees (24 percent) from living the retirement they expected.

The average American claiming Social Security at 62 could spend about 64 percent of their monthly Social Security benefits on health care costs

“The average American claiming Social Security at 62 could spend about 64 percent of their monthly Social Security benefits on health care costs,” said Ambrozy. “That’s why it’s so important to consider optimizing Social Security. Too many retirees need the money, but few are maximizing their benefit.”

More needs to be done to combat Social Security misconceptions

Consumer expectations may also be too high. More than half of future retirees (53 percent) and 59 percent of recent retirees expect Social Security to cover half or more of their expenses in retirement. However, the Social Security Administration notes the program is designed to replace 40 percent of the average retiree’s pre-retirement income. About a quarter of current retirees say their Social Security payments are either less or much less than expected (25 percent of recent retirees and 23 percent of those retired for 10-plus years).

The survey indicates that while older Americans perceive they understand Social Security, a moderate lack of knowledge exists about the basic facts of the program. For example, 91 percent of older adults don’t know what factors determine the maximum Social Security benefit an individual can receive.

Consumers crave knowledge to help combat their misconceptions, and they look to their financial advisors for information. Seventy-nine percent of future retirees who work with a financial advisor say they would switch advisors if it meant they would receive advice on maximizing Social Security benefits. However, less than one-in-five older adults (17 percent) have received advice related to Social Security (17 percent) from a financial advisor.

Advisors need to help clients understand the intricacies of Social Security, and how their benefits play a role in a holistic retirement plan. Adults collecting Social Security who work with an advisor report receiving hundreds of dollars more, on average, from their current Social Security payment than those that don’t ($1584 on average vs. $1290, respectively).

Tools such as Social Security calculators also can help close consumers’ knowledge gaps. More than two-in-five future retirees (41 percent) used a Social Security calculator to help estimate their benefits.

The Nationwide Social Security 360 Analyzer® provides a comprehensive look at Social Security filing strategies and helps position Social Security in the context of an individual’s or family’s retirement income needs.

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The 2017 Social Security Study was conducted online within the U.S. by Harris Poll on behalf of the Nationwide Retirement Institute between May 26 and June 6. Respondents comprised 1,012 U.S. adults aged 50 or older who are either retired or plan to retire in the next 10 years and collecting Social Security or planning to. Data are weighted where necessary by age by gender, race/ethnicity, region, education, household income, retirement status, and propensity to be online to bring them in line with their actual proportions in the population.