Turns out, Americans surveyed by the Financial Planning Association (FPA) and AARP aren’t very knowledgeable and they’re not going to planners or other experts for help. Read the full report here.
“The survey sends a clear message,” Jeannine English, president of AARP, said at a press conference Sept. 28 at the FPA Annual Conference—BE Boston 2015. “Most future beneficiaries lack the knowledge they need to make good decisions they need about Social Security.”
This knowledge gap could cost future beneficiaries many thousands of dollars and it not only affects them but their loved ones as well.
“I know from hands-on experience that Social Security is the cornerstone of any retirement plan,” said FPA President Ed Gjertsen, CFP®. “If it’s not addressed properly, beneficiaries and families can really miss out.”
They think they know Social Security, according to the research. Nearly a half of those surveyed said they are “very” or “somewhat” knowledgeable about how their benefits will be determined.
The reality is that most Americans can’t afford a financial planner, so how do we close the knowledge gap for them? That’s a question Sharon Epperson, senior personal finance correspondent at CNBC, posed to a panel of professionals at the closing general session at BE.
“Financial planners are key in helping your clients and consumers know the information about Social Security in order to make the best decisions for them,” said Gary Koenig, vice-president of financial security at the AARP Public Policy Institute.
While planners won’t be able to give all the goods away for free, Koenig suggested they get involved with virtual and in-person “town halls” AARP is planning to host across the nation for consumers who don’t have access to a planner.
The key takeaways when combining the data on what consumers said and what CFP® professionals said regarding Social Security:
- CFP® professionals expect that Social Security will be a lower percentage of retirement income for their clients than consumers estimate, reflecting the data showing that those who used a professional financial adviser are more affluent than those who had not.
- Consumers think they are more knowledgeable about how their Social Security benefits are determined than CFP® professionals believe their clients are; 9 percent of consumers say they are very knowledgeable compared to the 1 percent of CFP® professionals who believe their clients are very knowledgeable.
- CFP® professionals are twice as likely to say they are very confident that the Social Security system will provide their clients with benefits at least equal in value to those received by today’s retirees (14% versus 7% of consumers).
- CFP® professionals were far more likely to correctly identify 10-20 years as the length of time the trust fund would remain solvent (50% vs 27% for consumers), whereas consumers thought it would be exhausted earlier.
- Nearly three in 10 (28%) CFP® professionals recommend to clients that they wait to claim benefits until age 70, but only 13 percent of consumers plan to wait that long.
- More than 90 percent of CFP® professionals recommend that clients check their estimated Social Security benefits at least once every couple years, yet only 64 percent of consumers have done so in the past two years.
One thing consumers could do—your clients included—is sign up for a My Social Security account on the Social Security website, said Dr. Thomas Hungerford, the associate commissioner for retirement policy at the Social Security Administration.
This is where consumers could find answers to common questions about benefits, have access to their Social Security Statement (as the SSA isn’t sending out paper reports anymore) and find out if there are any errors with their earnings so they can figure out how to fix them.
“The people who are approaching retirement are probably more computer savvy, so we do have a lot of web-based resources,” Hungerford said. AARP also offers a plethora of helpful calculators and tools on its website.
According to Jeannine English, now is the time to fill the knowledge gap for tomorrow’s retirees, because “many people don’t realize how much they will need Social Security.”
Journal of Financial Planning
Editor’s Note: Watch the full press conference here: