AMERICAN retirees are at risk of making major errors with their benefits, research has found.
A shocking 78% of Americans ages 55 to 65 cannot pass a basic true or false quiz about Social Security.
Americans are at risk of making “tragic mistakes” in retirement due to a lack of education on Social Security benefits, says financial planning consultant David Freitag following his company’s latest study.
A quiz by MassMutual found that 78% of Americans approaching retirement or in retirement struggled to answer 13 true or false questions about Social Security.
The questions and their answers were as follows:
- In most cases, if I take benefits before my full retirement age, they will be reduced for early filing. True.
- If I am receiving benefits before my full retirement age and continue to work, my benefits might be reduced based on how much I make. True.
- If I have a spouse, he or she can receive benefits from my record even if he or she has no individual earnings history. True.
- If I have a spouse and he or she passes away, I will receive both my full benefit and my deceased spouse’s full benefit. False.
- Generally, if I am in a same-sex marriage, there are different eligibility requirements when it comes to Social Security retirement benefits. False.
- The money that comes out of my paycheck for Social Security goes into a specific account for me and remains there, earning interest, until I begin to receive Social Security benefits. False.
- If I get divorced, I might be able to collect Social Security benefits based on my ex-spouse’s Social Security earnings history. True.
- Under current law, Social Security benefits could be reduced by 20% or more for everyone by 2035. True.
- Under current Social Security law, full retirement age is 65 no matter when you were born. False.
- If I file for retirement benefits and have dependent children age 18 or younger, they also may qualify for Social Security benefits. True.
- If I delay taking Social Security benefits past the age of 70, I will continue to get delayed retirement credit increases each year I wait. False.
- Social Security retirement benefits are subject to income tax just like withdrawals from a traditional IRA account. False – special rules limit taxes on Social Security income to only up to 85% of benefit.)
- I must be a U.S. citizen to collect Social Security retirement benefits. False.
The amount of money you will receive from Social Security depends largely on the age at which you decide to begin claiming.
Currently, the full benefit age is 66 years and 2 months for people born in 1955, and it gradually rises to 67 for those born in 1960 or later.
While most Americans (92%) know that the payment is reduced if you claim before the full retirement age, only 48% realize there is no benefit to delaying benefits past the age of 70.
Choosing when to claim Social Security benefits is a major step in retirement planning.
TRAGIC MISTAKES
Claiming early may mean you can stop working at a younger age, but will reduce your income.
On the other hand, you will have to keep working or rely on your 401k and other savings if you want to delay Social Security until 70 and receive the maximum benefits.
“You’ve got to figure those decisions into that period of time, or you’ll make tragic mistakes, and that’s not a good thing,” said Freitag.
Around 56% of Americans lack access to a 401k through their employer, the Economic Innovation Group found in its analysis of 2021 Census data.
NO RETIREMENT
If you have no retirement savings but still want to stop working, there are ways around it.
On top of Social Security, you may have forms of equity in your home or your car that could be taken out.
Some Americans move overseas and retire in places where their money goes further.
And it’s never too late to start budgeting.
The U.S. Sun has compiled a list of ways to start saving for retirement at any age.
And see what a financial pro advised one 64-year-old with no savings, no job, and huge credit card debt to do.