HUGE GAP IN PUBLICS KNOWLEDGE OF SOCIAL SECURITY RULES! There is a huge gap between what most Americans think they know about Social Security and the actual rules governing the nations primary retirement program, according to a survey released by Financial Engines recently. As a result of this knowledge gap, typical retirees leave up to $100,000 in lifetime benefits on the table. For a married couple, the difference between a smart claiming strategy and the urge to grab the money as soon as possible could be $250,000 or more over their joint lifetimes, the survey found. Social Security is the linchpin of retirement income for the vast majority of households, said Christopher Jones, chief investment officer of Financial Engines, the largest provider of managed accounts for employer-based defined-contribution plans. Over the past few years, Financial Engines has branched out into managing participants retirement income plans and is looking to add features. As part of the online survey conducted last fall, Financial Engines asked more than 1,000 people who are retired or close to retirement eight questions about claiming Social Security benefits. Of those respondents who hadnt yet claimed Social Security, 74% scored a grade C or lower. Just 5% were able to answer all eight questions correctly. Our survey clearly shows this decision is more difficult than most people believe, Mr. Jones said. There are few financial planning decisions that can have such a dramatic impact on the standard of living in retirement. In addition to identifying some costly knowledge gaps, the survey found high interest in getting help with selecting the right household claiming strategy. Seven in 10 near-retirees who hadnt yet claimed Social Security said they would be at least somewhat interested in a service provided by their employer to help them develop a claiming strategy. Of those, 39% said they would be extremely or very interested in this type of Social Security-claiming help. Financial advisers are best suited to help people understand how to put the building blocks of a retirement plan together, such as Social Security, retirement savings and, for some people, continued employment, Mr. Jones said. In the current environment, people may be better served by tapping their savings in order to defer Social Security as long as possible. Although an adviser may be able to improve a clients portfolio returns by 100 to 200 basis points through appropriate investment selections and diversification, Mr. Jones said that guiding clients to a better Social Security-claiming strategy could increase their lifetime income by 25% or more. Financial Engines research found more than 8,000 possible Social Security-claiming strategies for a married couple when all their options to claim benefits between 62 and 70 - based on their own earnings record or as a spouse, as well as the possibility of stopping and restarting their benefits - are considered. Although clients can claim Social Security benefits as early as 62, their benefits will be permanently reduced, they will be subject to earnings cap restrictions if they continue to work and they will forfeit the ability to engage in creative claiming strategies that could boost their lifetime income. An individual must be at least the full retirement age of 66 to file and suspend benefits or to restrict the claim to spousal benefit only. Each person can choose only one claiming strategy. By Mary Beth Franklin -INVESTMENTNEWS.COM
Posted on: Wed, 19 Mar 2014 17:29:43 +0000
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