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What Do People Know About Social Security?
General Information
Title
What Do People Know About Social Security?
Author
Joanne Yoong, Lila Rabinovich, and Saw Htay Wah
Publication Type
Working paper
Outlet
CESR-Schaeffer Working Paper
Year
2015
Abstract
For the United States, a key pillar of citizens’ financial stability in retirement is the Social Security system. Hence, robust comprehension of Social Security benefits and how they may change due to individual choices are vital components of long-term financial planning and wellbeing. In this 2015 study, based on a 2010 benchmark survey by Greenwald et al, we update our understanding of what people know about Social Security, explore the current state of Social Security literacy and its association with retirement planning and, where feasible, make comparisons over time. We also expand upon the scope of the 2010 analysis by considering the experiences and knowledge of individuals above the age of 65 and those who have already retired.
In brief, we continue to find low levels of self-reported retirement preparedness, and actual and self-reported retirement literacy overall. While respondents can identify the general features of the Social Security system, still lacking are clear understandings of how the system works and the impact of their individual choices. For example, respondents express most familiarity with the age of eligibility, and many know benefits are affected by claiming age and do not have to be claimed upon retirement. However, many people are unfamiliar with how their benefits are calculated and how their actions can affect those benefits. In fact, fewer than 5% of individuals feel they were very knowledgeable about retirement benefit calculation. There is relatively widespread confusion about the full retirement age and how Delayed Retirement Credits work. We find the factors of age, income and education are significantly and independently positively associated with knowledge and preparedness across all our measures. Meanwhile, Hispanics and Blacks are at a particular disadvantage relative to non-Hispanic Whites.
In brief, we continue to find low levels of self-reported retirement preparedness, and actual and self-reported retirement literacy overall. While respondents can identify the general features of the Social Security system, still lacking are clear understandings of how the system works and the impact of their individual choices. For example, respondents express most familiarity with the age of eligibility, and many know benefits are affected by claiming age and do not have to be claimed upon retirement. However, many people are unfamiliar with how their benefits are calculated and how their actions can affect those benefits. In fact, fewer than 5% of individuals feel they were very knowledgeable about retirement benefit calculation. There is relatively widespread confusion about the full retirement age and how Delayed Retirement Credits work. We find the factors of age, income and education are significantly and independently positively associated with knowledge and preparedness across all our measures. Meanwhile, Hispanics and Blacks are at a particular disadvantage relative to non-Hispanic Whites.