While not all United States citizens need help when it comes to Social Security decisions, it is clear that the majority do.

In a press conference held in the exhibit floor at the FPA BE conference in Boston, the FPA and AARP announced joint research revealing an enormous Social Security knowledge gap. 

Overconfidence among Americans is a major problem that can cause mistakes. FPA/AARP research found that 9 percent of consumers believe they are very knowledgeable, with an additional 38 percent who believe they are somewhat knowledgeable.  While on the other hand CPF professionals see the opposite, with them believing that just 1 percent of their clients are knowledgeable and 31 percent are somewhat knowledgeable.

Speaking at the press conference, AARP president Jeannine English noted that  it is hard for many to maximize the value of Social Security's benefits if they do not have the basic facts. “Most people don’t understand the importance of when you claim,” She said.  They do not understand how much less they get if they don’t wait."

For most retirees, Social Security is their primary source of retirement income. “Many people don’t realize how much they will rely on Social Security," English said. "Consumers may not realize the extent of their knowledge gap.”

One serious concern for consumers is that Social Security will not be there for them.  English addressed these fears, saying, “We know that Social Security would pay out 75 percent of promised benefits [even after 2034 when funding problems arise], unless Congress takes action.”

However, there was no joint solution or recommendation being offered by either organization as part of the research.  When asked about the issues Social Security faces, English responded, “Until 2034 Social Security will be fully funded.  We hope that Congress will look at that.”

Edward W. Gjertsen, II, currently serving as FPA president, said Social Security is the cornerstone of any retirement plan.  He spoke of the reason for its creation, stating, “Social Security is anti-poverty benefit.  It is giving security.”

“As planners, 81 percent believe that maximizing what you get out of Social Security is important,” said Gjertsen.

One concern he cited from the research was that many people think they need to take Social Security early. 

A Panel’s Reactions To The Research

Following the press conference, a panel discussed the research results.  It was made up of Gary Koenig, vice president of financial security at the AARP Public Policy Institute, Dr. Thomas Hungerford, associate commissioner of the Office of Retirement Policy Social Security Administration, and Dr. Dave Yeske, practitioner editor of the Journal of Financial Planning.

Koenig’s noted the research indicated that many people do not know the rules of the road. They also fail to realize how important it will be for people when they retire.

“Social Security is complicated.  There are a lot of rules that are not quite obvious.  We need to make the information [make sense] so they can make good decisions,” said Koenig.  “It is not that they are ignorant.  It is complicated.”

Yeske, agreed, noting that financial planners even use Social Security software, because it is complicated. He pointed out that consumers need to save on their own and not rely soley on Social Security benefits for retirement. 

“Even for the mass affluent, it is not a trivial benefit,” Yeske said. Financial planners that work with their clients on Social Security look at future sources of income, health, life expectancy and more to help their clients make smarter decisions.

Yeske compared Social Security to longevity insurance.  “If it is going to work as longevity insurance, they have to defer it as long as possible,” said Yeske.  “We consider it to be a very important benefit.  Even the wealthiest clients want to do it right.  It also leaves room to leave a larger legacy.”

Hungerford said two things that really struck him about the survey.  "At least a majority know that 62 is the age of retirement. But they should be focusing on 66 and postponing," he said.  "They are focusing on the wrong age."

Equally disconcerting was where many Americans go for advice on Social Security. "Who do people ask?  Half of the people rely on family and friends.  Getting info from people that have as much information as they have,” Hungerford said.

The study showed that only one out of five rely on other experts. Since Social Security statements are not shared in the mail on an annual basis anymore, Hungerford recommended everyone set up a My Social Security account online.  He said it is important to also check earnings, as mistakes happen.  “It is rare, but fixable,” said Hungerford.

Regarding the future of Social Security, Hungerford said, “If Congress does nothing after 2034, the payroll coming in will cover 75 percent of benefits.  I suspect they will do something well before.”  He then joked maybe six months before.

“Congress is a very partisan place today.  I don’t see anything happening in the next year,” said Hungerford.

Want to get the research? 
Marc S. Freedman, president of Freedman Financial, Inc., who hosted the press conference, said the information is available at… AARP.org/SocialSecurityPlanning.

Also go to fpa-be.org for more information.

Lastly, there are various tools at ssa.gov.