Study finds lack of benefit knowledge, little faith in Social Security

Many retirement savers, including pre-retirees, lack a basic understanding of Social Security benefits, according to a recently published paper by T. Rowe Price. Furthermore, fewer than 4 in 10 surveyed have much faith that they will receive their currently scheduled benefits.

Given the complexity of the system, this knowledge gap is understandable, the paper said, but it underscores the urgent need for better education and guidance on this important aspect of retirement planning.

Widespread gaps in Social Security knowledge

Despite having the highest accuracy rates on Social Security questions presented in the survey, older respondents to the survey still had notable gaps in knowledge. While nearly all pre-retirees (aged 50 and older) understood that a reduction in benefits occurs when Social Security is claimed before full retirement age, fewer (62%) understood that the benefits increase if they delayed their claim beyond the full age.

Additionally, only 45% of those over the age of 50 knew their approximate Social Security benefit amount. Younger respondents, particularly Generation Z and millennials, showed even less understanding of the system. While 80% knew that Social Security is funded by payroll taxes, two-thirds incorrectly believed that benefits automatically start at age 65 if they are not claimed earlier.

Low confidence in Social Security

Meanwhile, confidence in Social Security’s ability to pay out currently scheduled benefits was remarkably low among survey respondents, with only 38% expressing confidence. Pessimism was particularly prevalent among younger generations, with both Gen Z and millennials expecting to only receive just over half of their currently scheduled benefits. In contrast, baby boomers anticipate receiving 88% on average.

The white paper further examines this knowledge gap and pessimism, as well as the popularity of potential solutions to the long-term funding challenges of the program.

The following are additional survey findings:

• None of the survey’s solutions to Social Security’s long-term funding challenges gained widespread support from survey respondents. The choice of Congress not taking any action, thereby allowing the Social Security Trust Fund to deplete (which would result in a 20% cut), was the least popular solution, with 60% disliking this option. Raising or eliminating the income cap on payroll taxes, while technically receiving the most support in comparison to the other solutions, still only garnered approval from just over one-third of respondents.
• The official Social Security website, SSA.gov, is a frequent source of information about Social Security benefits, used by 64% of survey respondents. Use of the site jumps to 85% among respondents who are aware of their approximate benefits, highlighting a link between information-seeking behavior and benefit awareness.
• Among investors who work with financial advisors, 67% turned to them for Social Security guidance. While that indicates that advisors are an important information source, it also represents an opportunity to further educate clients on the benefit, the paper said.

“This research identifies a major gap in retirement savers’ knowledge about Social Security benefits that can adversely affect their retirement,” said Roger Young, CFP, senior financial planner at T. Rowe Price. “Whether investing on their own or through a financial advisor, it’s critically important for investors to learn as much as they can about Social Security. Greater understanding can help individuals make more informed decisions and lead to better retirement outcomes.”

Implications for advisors

In addition to sharing the above findings, the paper shared the following implications for advisors:

Offer comprehensive education and strategy: Advisors can educate clients about Social Security basics, including eligibility, benefit calculations, and the impact of claiming age. They can also demystify complex terms and provide personalized claiming strategies, helping clients decide the optimal time to claim benefits, based on their financial situations, health, and retirement goals. This includes strategies for couples to maximize their combined benefits.

Integrate with broader retirement planning: By incorporating Social Security into a comprehensive retirement plan, advisors can recommend strategies that complement other income sources like pensions, 401(k)s, and IRAs. This holistic approach can help clients optimize their overall retirement income, providing a clearer picture of their financial future and enhancing their confidence in retirement planning.

Address concerns and offer targeted support: Advisors can reassure clients about the viability of the Social Security system1 and potential changes to the program. This can help them make informed decisions without overreacting to uncertainties. Data show that 33% of workers who engage with financial advisors do not seek their guidance for Social Security benefit information. This is a significant opportunity for advisors to enhance their value proposition and deepen client relationships by offering expertise in this critical area.

The paper features the latest findings from the firm’s annual Retirement Savings and Spending Study, which was conducted in 2024, and explores the financial attitudes and behaviors of 401(k) savers.

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