Social benefits is the most important source of U.S. retirement income, but a new study from the Nationwide Retirement Institute on retirement planning showed that there is a lot that Americans need to freshen up on.
Most Americans feel that they have a solid understanding of social security, yet they are unsure of how social security should be included in their retirement plan, or whether the program will be there when they retire.
According to the study, 89% of American adults are at least a little confident in their knowledge of social security; however, only 16% know the age at which they are entitled to full benefits, 45% believe or do not know that social security benefits will increase automatically when they reach retirement age after early application, 54% do not know what percentage of their income will replaced by social security, and 55% do not know that social security benefits are tax-free.
Knowing how social security benefits work can help American workers better prepare for their retirement years. Social security replaces a certain percentage of an employee’s early retirement income based on lifetime earnings, but if you apply before full retirement age, the monthly social benefits are permanently reduced.
Social security was also never intended to be the only source of income after retirement. According to the Social Security Administration, most financial advisors say you need about 70% of your early retirement income to live comfortably in retirement, including your social benefits, investments, and personal savings.
The study also noted that financial professionals can help bridge the knowledge gap. Two-thirds (67%) of American adults would be interested in talking to a financial professional about creating income streams that would allow them to delay applying for Social Security benefits. In addition, about half (49%) of American adults would be interested in discussing spousal benefit strategies for social security with a financial professional.
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This article was originally published on GOBankingRates.com: Social Security: Most Americans do not know the basics