A majority of recent retirees (69%) would not change the age they started to collect Social Security, according a new survey of Americans age 50 or older released by the Nationwide Retirement Institute on Thursday.
The survey found nearly a quarter of recent retirees (23%) regret claiming their Social Security benefits before full retirement age, while 2% said they would draw their benefits earlier and 6% said they were not sure.
Of the respondents who said they would not change when they began claiming benefits, 39% said they were reacting to events beyond their control such as poor health or job loss, according to the third annual online survey of more than 900 Americans in or nearing retirement.
The survey revealed that one of the biggest shocks to current retirees is the cost of health care. One in four respondents said health care expenses keep them from enjoying the retirement lifestyle they had expected. Separately, a study released last month by Health View Financial Services projected that at current general inflation rates and faster increases in health care costs, retiree medical expenses could outpace Social Security benefits in 20 years.
“The average American claiming at 62 will spend about 61% of their monthly Social Security benefits on health care costs,” said Dave Giertz, president of sales and distribution for Nationwide. “That is why it is so important to optimize Social Security,” Mr. Giertz added. “Too many American workers need the money but are missing out on hundreds of thousands of dollars in retirement income by not maximizing their benefit.”
The average benefit for a worker who claims Social Security in 2016 at full retirement age is $1,341 per month, according to the Social Security Administration. Those who claim retirement benefits at the earliest age of 62 receive only 75% of their full retirement age amount. But those who are willing to delay benefits are rewarded for their patience. They receive an extra 8% per year for every year they postpone collecting benefits beyond their full retirement age up to age 70.
Given the complexity of the more than 2,700 rules that govern Social Security, it is not surprising that many of today's retirees failed to maximize their benefits. But it looks like future retirees may be in a better position to make smarter decisions about when and how to claim benefits.
“The development of Social Security calculators is helping to close the Social Security knowledge gap and combined with the holistic perspective of an adviser, American workers can position themselves to live their dream retirement,” said Kevin McGarry, director of the Nationwide Retirement Institute.
More than 40% of those who are approaching retirement said they have used a Social Security calculator to estimate their future retirement benefit compared to just 11% of current retirees, according to the survey. Less than one-third of future retirees said they would claim Social Security at 62.
For the third year in a row, more than three-quarters (76%) of future retirees in the Nationwide survey who work with a financial adviser or who plan to work with one say they are likely to switch to an adviser that could tell them how to maximize their Social Security benefits. But only about half of those who work with an adviser said they were given any guidance on when to claim benefits.
Why? A separate, yet-to-be released survey conducted for Nationwide last fall of more than 250 financial advisers with clients who have at least $250,000 of investable assets found that many advisers were not comfortable offering advice on Social Security. More than 60% of them said they wanted more information and 54% said they would like more tools and products.
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Mary Beth Franklin is a contributing editor to InvestmentNews and a certified financial planner.