Income Planning

Social Security: All That We Don’t Know

Surprisingly, advisors are seldom the ones educating their clients

by David G. Freitag, CLU, ChFC, CRPC

Mr. Freitag is a financial planning consultant focused on Social Security and retirement income planning with Massachusetts Mutual Life Insurance Company (MassMutual) in Springfield, MA.  Connect with him by e-mail:  David Freitag is a registered representative and an investment advisor representative of MML Investors Services, LLC Member SIPC 1295 State Street, Springfield MA 01111 (413.788.8411).

In an effort to identify consumer perceptions about Social Security, and how benefits can impact their plans for retirement, a new study, Welcome to the Social Side of Retirement, identifies that there is much more to be done to answer very basic questions about Social Security in general and about retirement benefits specifically.

In 2014, MassMutual introduced this educational initiative to help clients understand how Social Security benefits can impact their plans for retirement. It continues to make inroads, but clearly, there is much more to be done as we continually hear very basic questions about Social Security in general and about retirement benefits, specifically.

To take a benchmark and drive awareness of the basic facts of this popular and important government program, MassMutual commissioned a market research study with KRC Research in early 2015.* This study was based on ten basic questions about Social Security retirement benefits. The results surprised us and I think they will surprise you, as well.

Some Key Findings

1. Just 8 percent of the people interviewed considered themselves very knowledgeable about Social Security retirement benefits. Even more troubling is that nearly 3 in 10 respondents said they have little or no knowledge about the largest budget program in the federal government and the role it plays in their plans for retirement. When all the numbers were totaled and the results counted, only 1 person from the entire test group of 1,513 answered all survey questions correctly, and nearly two in five responders got fewer than half of the questions right.

2. There is a general misunderstanding about benefits and citizenship. Three-quarters of all the respondents thought that U.S. citizenship was required to collect benefits. In reality, Social Security retirement benefits are not dependent on citizenship. If you are not a U.S. citizen, these benefits are dependent on lawful alien status, permission by the U.S. Citizenship and Immigration Services (USCIS) to work in the U.S and have a Social Security Number.

3. One big surprise is that 71 percent of survey respondents believed that full retirement age for Social Security benefits is age 65 years old. Even though the full retirement age requirement for people born between 1943 and 1954 was changed in 1983 to 66, people clearly get confused between retirement benefits and qualifying for Medicare.

4. More than half of the respondents (55%) incorrectly believe that they can continue working while collecting their full Social Security retirement benefits regardless of their age. The earnings test and benefit offset rules applied by the Social Security Administration to those people who are working before their full retirement ages are clearly not well understood.

One of the most important rules in the Social Security program is that with a married couple, when someone dies, one of the benefit cash flows stops and the overall household income will drop as a result

5. More than half of survey respondents did not know that divorced adults can collect on an ex-spouse’s earning history under certain conditions. In some cases, the ability to file and collect spousal benefits from an ex-spouse can increase a divorced client’s retirement income significantly, yet this ability to make a restricted claim is still a mystery to most.

6. One of the most important rules in the Social Security program is that with a married couple, when someone dies, one of the benefit cash flows stops and the overall household income will drop as a result. Just over half (53 percent) of the people in the study knew the correct answer to this question and 47 percent were not aware of this fundamental component of the Social Security system. The income gap created by the death of a spouse represents one of the greatest needs for permanent life insurance in retirement.

7. Based on the study, men and women have different views about Social Security and project different confidence levels about retirement benefits. According to the study, 68 percent of men are optimistic that benefits will be available in retirement, while women are less optimistic with 59 percent thinking that benefits will be available.

8. There is also a knowledge gap about Social Security retirement benefits in the Hispanic population. Just more than half (54 percent) of Hispanics age 25 to 65 answered half of the survey questions correctly as compared to 64 percent of non-Hispanics of the same age.

9. Predictably, the study revealed that younger respondents (age 18-39) have significantly less knowledge about Social Security retirement benefits than respondents over the age of 40. This issue with this finding is that for young families under the age of 40, Social Security survivor benefits represent a very substantial income replacement solution when a covered person dies. This poses the question, how can sound financial planning decisions by younger clients be formulated when Social Security is discounted, ignored or misunderstood?

The results of the MassMutual study were reinforced by another recent study reported by the Financial Planning Association and AARP.  Only 9 percent of the respondents in this study felt they were very knowledgeable about their Social Security retirement benefits.

A particularly interesting finding was the source of information used by consumers to get help with their questions about their Social Security retirement benefits. In the Financial Planning Association and AARP study, 46 percent of respondents said that their help came from friends and family. About 45 percent referred to the Social Security Administration itself.

Surprisingly, only 16 percent reported using a professional financial advisor for information about Social Security filing strategies. Even more surprising is that only 7 percent looked to their accountant for help with Social Security.
So how knowledgeable are you about Social Security retirement benefits? Given the recent changes in the Social Security Law, are you in a well-informed position to help your clients so that they do not need to rely on potentially misinformed friends and family members? ◊


*Methodology: The research was conducted by KRC Research on behalf of MassMutual from
February 26 to March 2, 2015 via an online survey among 1,513 Americans (1,000 non-Hispanic age 25 to 65; 513 Hispanic age 18+).


One response to “Social Security: All That We Don’t Know”

  1. Bob Mirrissey says:

    Special rule receiving SS pay in the middle of the year. Birthdate 9/10/53. I took my first check 11/10/15 from SS. 1651.00. I understand the $1 for every $2 over 15700.00. I began the benefit in the middle of year. I am still working. I have earned 15800 up to 9/1/15. I have earned another 6000.00 from 9/1/15 thru 12/30/15. Under the special rule( middle of year) I am confused as what I can earn without penalties. Any help I appreciate. Sincerely, Bob