A growing number of older adults have no plan beyond Social Security to fund their retirement, a recent survey said.
One in five (21%) adults age 50 or older said they have no source of retirement income besides Social Security, up from 13% in 2014, the Nationwide survey said.
A decade ago, 48% of respondents in this age group said they had a pension in addition to Social Security, compared to just 31% in 2023, the survey said.
The growing reliance on Social Security comes as an increasing number of respondents said they were doubtful that they would receive their full benefits, according to the survey. Nationwide said 75% of adult respondents aged 50 or older believe Social Security will run out of funding in their lifetime, up from 66% in 2014.
Moreover, only 8% of respondent understood how to maximize their Social Security benefits, according to the survey. However, only 8% correctly identified all the listed factors determining the maximum Social Security benefits an individual can receive.
"Nearly four out of five Americans say that the Social Security system needs to change, while at the same time our research shows that most people don't understand how the current system works," Tina Ambrozy, Nationwide senior vice president of strategic customer solutions said in a statement. "Social Security is a complex system, and it can be difficult to know what you are entitled to. The past ten years of research have been about providing insights to aid that effort, and while we have made notable progress, we still have work to do."
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Knowing what age to retire at to get full retirement benefits was one of the misconceptions respondents had, the survey said. Only 13% of adults correctly guessed their full retirement age based on their birth year. On average, Americans said it was 60 years of age; Generation Z and millennials thought 54 and 55, respectively. The correct age is 66 or 67, depending on the year a person is born.
Almost half (49%) of adults also erroneously believed that if they filed for Social Security early, their benefits would automatically increase once they reached their full retirement age. These misconceptions could cost Americans money. The upfront benefit of claiming retirement benefits at full retirement age is a higher payment, according to one retirement planning expert.
"For each year an individual defers beyond their full retirement age, until age 70, they will generally accrue a permanently increased benefit amount of 8%," Joseph Doerrer, Mezzasalma Advisors vice president of wealth planning, said. "For an individual with a full retirement age of 67, deferring to age 70 means a permanent benefit increase of 24% above their full retirement age amount."
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Younger Americans were less optimistic about what role Social Security benefits would play in their retirement plans, according to the survey.
Roughly 45% of Gen Z and 39% of millennials believed they would not get a dime of the Social Security benefits they have earned. Seventy-six percent of Gen Z and millennials said they would continue working in retirement because Social Security won't provide enough income.
Social Security recipients stand to see their benefits cut by 20% as soon as 2034, one year earlier than was initially projected, according to the annual trustees' report recently released by the Treasury.
The revision comes on the expectation of slower near-term economic growth – gross domestic product and labor productivity were revised by about 3% for the projected period. Estimates also showed that Social Security trust funds declined by $22 billion in 2022 to $2.83 trillion.
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