Study finds wide gaps in knowledge about the retirement program
of ConsumerAffairsKey findings
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Widespread Gaps in Understanding: Many Americans, including pre-retirees, lack basic knowledge about how Social Security benefits work.
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Older Adults Knowledge Gaps:
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Nearly all know early claiming reduces benefits.
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Only 62% knew delaying claims beyond full retirement age increases benefits.
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Just 45% of those over 50 knew their approximate benefit amount.
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Younger generations more misinformed
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80% of Gen Z and millennials correctly identified payroll taxes as the funding source.
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Two-thirds mistakenly believe benefits start automatically at age 65 if unclaimed.
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Indicates a strong need for early retirement education.
A new study from T. Rowe Price found a concerning lack of understanding among Americans when it comes to Social Security benefits, a cornerstone of retirement income for millions. Drawing on findings from its 2024 Retirement Savings and Spending Study, the firm identifies a significant knowledge gap that cuts across age groups, including those nearing retirement.
Even among pre-retirees aged 50 and older who performed better on Social Security-related questions than younger counterparts key knowledge gaps persist.
Nearly all in this group correctly identified that claiming benefits before full retirement age leads to reduced payments. However, only 62% understood that delaying claims beyond that age results in increased benefits. More strikingly, fewer than half (45%) of respondents over 50 knew their approximate benefit amount.
Among younger generations, the misunderstandings deepen. While 80% of Gen Z and millennials correctly identified payroll taxes as the funding source for Social Security, a significant majority mistakenly believed that benefits automatically begin at age 65 unless claimed sooner. The studys authors saud this reflects a broader trend of misinformation and highlights the need for early education on retirement fundamentals.
Low confidence in the system
Beyond knowledge gaps, the study found an alarming lack of confidence in the future of Social Security. Only 38% of all respondents expressed faith in the systems ability to pay out currently scheduled benefits. Younger Americans are particularly skeptical, with Gen Z and millennials expecting to receive just over half of their promised benefits. In contrast, baby boomers remain more optimistic, projecting they will receive about 88% of scheduled payments.
T. Rowe Prices white paper also delves into public sentiment around potential solutions to Social Securitys long-term funding challenges. Yet, none of the proposals have broad backing. The least popular? Congressional inaction that would allow the trust fund to run dry, leading to a 20% cut in benefits. Sixty percent of respondents rejected this path.
The most favored option raising or eliminating the income cap on payroll taxes received tepid support, with just over one-third in favor. The lack of consensus suggests a challenging political landscape for Social Security reform.
The study also examined information-seeking behavior and its impact on Social Security knowledge. The Social Security Administrations official website (SSA.gov) emerged as the most common source, used by 64% of respondents. Usage surged to 85% among those who were aware of their benefit estimates, suggesting a strong link between proactive research and financial awareness.
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Posted: 2025-04-09 12:32:44
