Social Security has been around for more than 80 years. So why are people still confused?

A recent report from the Government Accountability Office, the non-partisan investigative arm of Congress, found many Americans don’t completely understand even some of the basics about Social Security.

The report, issued in September of 2016, included a review of nine prior studies and surveys and found – among other things – people didn’t understand how much greater their monthly benefit could be if they filed for benefits at a later claiming age, didn’t understand spousal benefits, and didn’t understand how working while receiving benefits affected those benefits.

“Understanding these rules and other information, such as life expectancy and longevity risk, could be central to people making well-informed decisions about when to claim benefits,” the report found.

The problem

Some of the problems may be with Social Security itself, the report concluded. During the review, the GAO observed 30 in-person claims at Social Security field offices and found in some cases claimants weren’t shown the advantage of delaying benefits and didn’t get information about the effect of working while claiming benefits.

For its part, the Social Security Administration agreed to review publication, increase training, and make adjustments that could help claimants make more-informed decisions.

The issue of Americans not fully understanding Social Security isn’t a new one. In 2015, the nonprofit senior advocacy group AARP collaborated with the Financial Planning Association® (FPA®) in a survey of 1,200 Certified Financial Planners ® (CFP®) and more than 1,200 workers ages 45-65. The survey found some knowledge gaps.

In that survey, among workers, only 60% knew that 62 is the earliest age they could start collecting, and even fewer – about 33% – knew they could earn their maximum benefit by delaying claiming until 70. Only 25% of workers who had been married knew that if they were married at least 10 years, they could collect benefits based on their ex-spouse’s work history.

What it means

Advisors may want to set aside time to talk about Social Security. Do clients understand? Are they about to make a big, irreversible mistake? Have they considered how Social Security will fit into a complete retirement plan? Consider reviewing Transamerica’s Field Guide to Social Security, a set of tools that can help you explain benefits and strategies.

“Many American retirees rely greatly on Social Security, making it imperative that they have the information they need to make wise claiming decisions,” the GAO report concludes. “Therefore, it is important that claimants understand key SSA rules and consider other factors that can assist them in making informed decisions about when to claim.”

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