The COVID-19 pandemic has had a dire impact on many Americans’ retirement plans, with more than a third of respondents in a newly released survey from Nationwide Retirement Institute saying they would have to retire later or not retire at all. And while many retirees rely on Social Security as a major source of their retirement income, more than 60% of adults surveyed say they now worry about Social Security running out of money during their lifetime.
Two separate surveys, which were conducted on behalf of the Nationwide Retirement Institute before and during the COVID-19 pandemic, highlight the concerns consumers have about Social Security. In fact, 63% think it is more important now than ever before to optimize Social Security benefits. And more than one-quarter of respondents who are eligible to claim Social Security say the pandemic caused them to change their decision about when to file for benefits.
“Americans are facing complex retirement scenarios as a result of the COVID-19 pandemic and market volatility,” said Tina Ambrozy, senior vice president of strategic customer solutions at Nationwide. “On top of this, adults across generations lack a basic understanding of Social Security benefits and ways to maximize those benefits.”
Of the 38% of respondents who said COVID-19 has impacted their retirement plans, 6% said they had been forced into early retirement due to job loss, 19% said they plan to delay their retirement date, and 10% said they plan never to retire.
More than a quarter of respondents who are currently eligible to claim Social Security said the pandemic has altered their plans about when to file for benefits, evenly split between those who expect to file earlier than planned and those who hope to delay claiming.
The original Nationwide survey was conducted in February, before the pandemic began, and was supplemented with online survey in mid-May. The surveys reveal a big knowledge gap among adults of all ages about how Social Security works, including eligibility ages for reduced or full benefits, how lifetime earnings affect benefits and how much of pre-retirement income Social Security benefits are likely to replace.
A separate online poll conducted by MassMutual in mid-March among 1,500 Americans age 55 to 65 revealed a similar lack of understanding of how Social Security works. One-third of respondents in the MassMutual survey failed a basic quiz about Social Security retirement benefits, while another 19% barely passed with a D grade. Only 3% scored an A+ by answering all 12 true or false statement correctly.
Given the lack of knowledge about Social Security across generations, the need for guidance from financial professionals is significant. More than three-quarters of adults (86% of millennials, 93% of Gen Xers and 74% of baby boomers) in the Nationwide survey who either work with a financial adviser or who plan to ask one about Social Security say that if a financial professional wasn’t able to show them how to maximize their Social Security benefits, they would find one who could.
“With so much uncertainty, many people are looking for help in identifying ways to take better control of their finances,” Ambrozy said. She pointed to free tools that financial advisers can use to help clients maximize their Social Security benefits, including the Social Security 360 Analyzer, which identifies optimal claiming strategies, generates client-ready reports to help guide conversations, and evaluates breakeven and cash flow analyses.
“In today’s environment amid the pandemic and recognizing the gap in consumer knowledge and misconceptions about Social Security, we want to make sure financial professionals are equipped to handle those discussions,” Ambrozy said.
Separately, the Alliance for Lifetime Income released its latest tracking study, which shows a majority of Americans who are nearing retirement are rethinking their plans. Conducted in June among Americans ages 56 to 75, the study contributes to mounting evidence that a retirement reset is underway in the U.S.
A majority of the respondents — 70% — report that pandemic has made them more pessimistic about their retirement plans. As a result, an estimated 3.2 million people have now decided to retire later than originally planned.
“The pandemic and resulting economic uncertainty and market volatility are leading the vast majority of the country’s pre-retirees to reconsider their retirement plans,” said Jean Statler, the group’s CEO.
Check out Mary Beth Franklin’s Retirement Repair Shop podcasts.
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