10 Social Security insights your clients should know

07/31/2024 — Key takeaways:

• Clients may need help clarifying the details of Social Security and the benefits they qualify for.
• Many Americans believe that the Social Security program will run out of money, but as long as there are workers, the Social Security Trust Fund will be paid out to beneficiaries.
• Social Security benefits alone are rarely enough income to live on.

When discussing Social Security with clients, it’s crucial to address and clarify the many misconceptions that often surround the program, including a commonly held belief that the money will run out. Many individuals hold misunderstandings about eligibility, benefits, and the application process, which can lead to confusion and anxiety. By taking the time to educate clients about the realities of Social Security, you can empower them with these insights to make informed decisions regarding their financial futures.

#1 Most Americans believe that the Social Security program will run out of money

3 in 4 adults aged 18 and older worry that the program will run out of money in their lifetimes.¹ Yet as long as there are workers, money is flowing into the Social Security Trust Fund and will be paid out to beneficiaries.

#2 About a third of Americans don’t have a clear sense of how much they will get in Social Security income¹

The Social Security Administration provides a free and secure my Social Security online account, which can produce up-to-date statements of a projected benefit.

#3 Most Americans don’t know the age at which they’ll receive full benefits

The age at which a worker is eligible to receive full benefits is their full retirement age (FRA). For individuals born in 1960 or later, their FRA is 67.

#4 Choosing to delay filing leads to increased monthly benefits

In fact, monthly benefits could increase by as much as 80%.  The earliest a worker can file for benefits is age 62 — at a reduced PIA. But delaying until as long as age 70, increases monthly benefits. There aren’t any added gains by delaying benefits past age 70.²

#5 1 in 2 Americans believe that if they claim benefits early, their benefits will go up when they reach FRA¹

That’s not true. The amount when benefits are claimed, plus any subsequent cost-of-living increases, is the amount that will be received over a worker’s lifetime. That’s why the timing of a filing decision is so important.

#6 It’s possible to work while receiving benefits

Although this statement is true, a worker’s age in relation to their designated full retirement age (FRA) matters. Those working prior to achieving their FRA won’t receive the full amount of annual Social Security benefits, so it’s important to understand the impacts and options of a phased retirement.

#7 You can fix a filing mistake, if you act quickly

You could withdraw your application within 12 months of first claiming benefits as long as you repay all benefits received. Doing so could increase your benefit amount later.

#8 If one spouse passes away, Social Security income could drop by as much as half

However, if both spouses were receiving benefits, the surviving spouse can continue receiving the greater of the two benefit amounts.

#9 Social Security benefits rarely provide enough income to live on

In fact, these benefits represent only about 1/3 of past earnings.³ For many workers, the question is, “How will I fill the gap between my projected Social Security benefit and the income I will need in retirement?”

#10 Benefits can provide inflation protection before and throughout retirement

Since 1975, the Social Security Administration has provided an automatic annual cost of living allowance tied to the change in the Consumer Price Index (CPI-W). The adjustment applies to both those who are currently receiving benefits and for workers who have not yet filed. In rare cases in which deflation occurs, benefits remain level.