It is perhaps no surprise that the ongoing economic fallout from the pandemic, including inflation, market volatility and the threat of recession, has prompted millions of Americans to reevaluate their retirement plans. new research from Nationwide Retirement Institute® shows that two-thirds of Americans (66%) say they worry more about their retirement income now than before—that’s a 10-point increase from 2021!
In volatile moments like the ones we are experiencing, it is easy to make emotional decisions with lifelong implications. Unfortunately, misconceptions about Social Security, which form the foundation of nearly every American’s retirement income strategy, are all too common, according to the survey. The good news is that with the right advice from a trusted financial professional, you can avoid the unintended consequences that can come with an uninformed decision.
What are people doing wrong about Social Security?
Nearly half (49%) of consumers believe that if they file for Social Security early, their benefits will automatically increase once they reach full retirement age — it won’t. Large numbers of boomers (39%) who are not currently receiving a Social Security plan before their benefits full retirement ageA decision that could cost them in the long run and should only be made with open eyes about the implications for the future.
Misunderstandings like these can make a huge difference in maximizing your retirement income. That’s why I think it’s important that even the most discerning retirement savers should include an advisor or financial professional in their Social Security decision-making process.
While 91% of survey respondents said they are at least somewhat confident in their Social Security knowledge, only 7% can identify factors which determine the maximum benefit, including:
- work history. Your benefits are based on the average indexed monthly income during the 35 years in which you earned the most.
- age. While you can start receiving benefits as early as age 62, you are not entitled to your full benefits until you reach your age full retirement agewhich varies based on the year of birth, and to get the maximum benefit you have to wait till age 70,
- Benefit break-even age. If you start receiving benefits before your full retirement age, you will receive a smaller benefit for a longer period; If you wait until your full retirement age or later, you’ll receive a higher monthly benefit for a shorter period. For those who wait to take benefits, if you live long enough, there comes a time when your total benefits will exceed the total you received when you first started out. he is Social Security break-even age,
- marital status. The maximum individual retirement benefit is based on the employee’s highest 35 years of income subject to Social Security taxes. In a married couple, both spouses may be eligible to receive the maximum individual retirement benefits based on their individual earning history. In 2022, the maximum monthly benefit ranges from $2,364 for those retiring at 62 to $4,194 for those waiting until 70. It’s also worth noting that making the decision to take profits early can have massive implications. surviving spouse, When one spouse makes a claim before full retirement age (FRA), they are potentially locking in a lesser survivor’s benefit for the other spouse.
Nearly half of adults (49%) don’t know or aren’t sure what percentage of their income is or will be replaced by Social Security in retirement. This makes it difficult to create a plan to help ensure that your income in retirement will be sufficient to help you maintain the standard of living you expect.
a little help goes a long way
A financial professional can help you estimate the income you will receive from Social Security and can identify additional income sources to either supplement your Social Security benefits or provide income that will help you fully Allows delay in claiming till the age of retirement. This may include possible solutions such as annuitieslife insurance, mutual funds or Exchange Traded Funds (ETFs).
There was a widely held misconception from our survey that may come as good news for many retirement savers – especially at a time when inflation is top of mind for almost everyone. More than two-thirds of Americans do not realize that Social Security is protected from inflation. recent estimates Says the cost-of-living adjustment (COLA) could reach 10.5% or more in 2023, providing a potentially significant buffer for many against rising interest rates and decades-high inflation.
While financial news headlines continue to provide a daily reminder that while some of us are on a direct line to retirement security, remember that you don’t have to navigate this challenging landscape on your own. Working with a trusted and qualified financial professional can help you feel more informed, prepared and secure in making the best decisions for your unique circumstances.
Senior Vice President, Nationwide Retirement Institute, Nationwide
Christy Martin Rodriguez currently serves as Senior Vice President of the Nationwide Retirement Institute® nationwide financialLeading teams responsible for advocating for and educating members, partners and industry leaders on issues affecting their ability to have a secure financial future. She was a founding member of the Ohio chapter of The National Association of Securities Professionals (NASP), an organization that helps people and women of color get involved in the industry.