Recent surveys show that a substantial portion of Americans are unaware of key elements of the Social Security system.
According to a study by T. Rowe Price, the vast majority (92%) of pre-retirees (aged 50 and over) are aware that benefits are reduced if Social Security is claimed before reaching Full Retirement Age (FRA). Still, only 62% understand the advantages of delaying claims beyond FRA.
Meanwhile, a staggering 28% of respondents aged 62 and over mistakenly believe Social Security benefits start automatically at age 65 if not claimed earlier. Many are likely confusing Social Security FRA (which varies by birth year) with their Medicare eligibility age.
The findings signal the need to increase awareness and Social Security literacy among the population. Ignorance of retirement age and benefit levels can lead to inadequate planning, resulting in adverse long-term consequences that could hinder the quality of life in retirement.
Financial advisors provide their insights on the Social Security system and offer guidance on how to optimize it for maximum benefits.
Delayed Gratification?
Delaying Social Security payments can significantly increase the monthly benefits for retirees. For each year they wait past full retirement age (up to age 70), benefits grow by about 8%. Done correctly, this maximizes lifetime benefits over the long term and reduces the risk of outliving one’s total savings.
Despite this, many are cashing in early.
The first half of fiscal year 2025 saw record numbers of people claiming Social Security retirement benefits early. Claims were up by more than 276,000 from October to April compared with the previous year, with more retirees claiming Social Security earlier.
Longevity anxiety could explain the impulse to pull the trigger sooner.“The idea of ‘I could die tomorrow’ is one reason the idea of pulling early endures,” says Terri Bailey, Accredited Financial Counselor and Owner of Daily Financial Success.
“Many boomers, for example, feel like they understand the math and that they only need to pull for so many years before the early distribution proves worth it. This is a complex viewpoint.”
Significant Other’s Significance
The impact of Social Security on remarried older Americans is particularly acute.
Academic research shows that the rate of Americans over 65 in the age group who remarry increased from 1990 to 2022, rising from 4.6 to 5.1 people per thousand – a marked contrast to the overall population, where remarriage rates have halved. Generally speaking, this growing group has a greater incentive to delay taking Social Security. “Delaying is a good strategy if you’re in a late-life second marriage and your spouse will have no (or limited) Social Security income,” says Lauren Williams, CEO at ProsperPlan Wealth. “Especially if your savings are earmarked for your children or another beneficiary.”
Done correctly, this strategy can continue to yield benefits long after the grave.
“The larger your Social Security, the greater your partner’s benefit will be should you pass away,” says Williams.
Personalize to Optimize
Social Security plays a major role in the life-altering transition from work to retirement. Yet, there is no one-size-fits-all strategy.
“Your marital status, spouse’s health, savings, risk profile, and what kind of return you expect from your portfolio all play a role,” says Joshua Mangoubi, Founder of Considerate Capital Wealth Management. “Depending on your opportunity cost — which varies from person to person — delaying could be a benefit or a risk.”
This is why many advisors believe they can offer a tailored service.
“I love educating clients on the ins and outs of Social Security, including lesser-known potential options such as pulling on a spouse’s benefit or widow’s benefits,” says Bailey. “We do the math and reverse engineer the playbook.”
Despite this, there are limits to even the most well-laid plans. It is not always possible to see what’s coming around the corner.
“The hard truth is that just as every investment carries some risk,” says Williams. “I would estimate that for roughly 70% of people, the right time to apply for Social Security won’t be known until they are many years into retirement or, unfortunately, in the event of an early death.”
Systemic Risks
Yet when finally hanging up their hat for the last time, many are left wondering: will Social Security still be there in the long run? Most Americans aren’t convinced.
According to a 2024 Nationwide Retirement Institute survey, nearly three-quarters (72%) of adults worry the system will run out of funding in their lifetime.
The anxiety is widespread. But Mangoubi tells his clients not to lose sleep over the issue.
“Social Security isn’t falling apart — it’s evolving,” he says. “The system’s under stress, but it’s more like a house with a strong foundation that needs a few beams reinforced. I fully expect lawmakers to step in with fixes like raising the income cap or adjusting the retirement age.”
Indeed, Nationwide’s survey revealed that 79% of U.S. adults believe the Social Security system needs to be changed.
Williams is looking to Washington to take some initiative.
“The government should stop kicking cans down the road and relieve people of the rampant anxiety around this program,” she says. “Especially when there is so much excess and waste in government.”
Social Security is complex, personal, and increasingly uncertain. To ensure better outcomes for Americans, knowledge of the system needs to be improved. On an individual level, careful planning with the help of a retirement financial advisor and tailored strategies can optimize benefits. While reforms will be needed, understanding the system today is the first step toward a financially secure retirement tomorrow.