Source: Social Security Administration via Facebook
Baby boomers, in particular, are facing a number of challenges. First and foremost, Boomers who weren't able to withstand the stock market's wild vacillations between 2007 and 2009 and sold wound up losing a substantial portion of their retirement nest egg.
Additionally, Social Security -- the financial backdrop designed to protect lower-income retirees, the disabled, and survivors of deceased workers -- is facing what could be a substantial cut in benefits sometime between now and 2033 if Congress can't find a way to increase revenue or cut expenses for the program. In other words, if boomers haven't diligently saved and invested for their retirement, then they could be in serious trouble.
However, the stock market may only be partly to blame for some Americans failing to reach their retirement goals, at least according to a recent survey from MassMutual Financial Group.
The biggest problem with Social Security, revealed
According to MassMutual, the greatest deficit when it comes to Social Security is actually a lack of education among retirees and workers. MassMutual came to this conclusion after KRC Research completed an online survey in late February and early March on behalf of MassMutual in which 1,513 people across the United States were asked 10 questions. In general, these were 10 fairly basic true or false questions pertaining to Social Security. A passing grade was considered three or fewer incorrect answers, while four or more incorrect answers would represent a failing grade.
Care to try your hand at the quiz (link opens PDF)? No cheating!!!
Source: Social Security Administration via Facebook
In other words, most people have very little understanding of the program that could be critical to providing them income during retirement.
What were some of the biggest misconceptions among Americans? Per MassMutual, approximately three-quarters believed you needed to be an American citizen in order to receive Social Security, which is false, 71% incorrectly identified age 65 as the full retirement age (it actually varies based on the year you were born), and 55% believed they could continue to work and collect full retirement benefits from Social Security, which is false.
Tackling another major misconception
Amazingly, MassMutual's survey didn't really touch on what I believe is the most dangerous Social Security misconception of all in much detail.
Source: Flickr user Joi Ito
In reality, the Social Security trust fund, known collectively as the Old-Age. Survivors and Disability Insurance Trust, or OASDI, is slated to run out of its cash reserves by 2033, primarily due to the demographic shift of boomers retiring and people living longer than ever (and thus being paid benefits for a longer period of time). But this is no way means it's going insolvent.
If Congress does nothing, benefits will drop by 23% to 77% of inflation-adjusted full retirement benefits in 2033 and the OASDI should be able to continue making payments to eligible beneficiaries through 2087. Congress has between now and 2033 to raise revenue through taxes, cut costs, or do some combination of both to help protect Social Security benefits. But no matter what happens, Social Security will be there for you when you retire.
How can we fix Social Security's education problem?
The primary takeaway from MassMutual's study is that Americans need to do a better job of seeking out information when it comes to their Social Security retirement benefits, because what they don't know could actually cost them a substantial amount of money over the long run.
Source: Social Security Administration via Facebook
Another solution? Consider talking to a financial advisor or a retired friend or family member. I can't guarantee you that a current retiree has made all the right moves, but they can certainly lend you knowledge about their personal experiences with Social Security that you may not be aware of. Likewise, a financial professional should know the ins and outs of Social Security and may be able to help you maximize your long-term take-home pay, but it still never hurts to double-check their suggestions against what you find on the SSA's website. Of course, you'll also find a mountain of information on Social Security from my Foolish colleagues and me as well.
The point being that the tools to become more knowledgeable with regard to Social Security are within your reach, so take the initiative and don't put off this necessary retirement education for a minute longer than you have to. Your retirement could depend on it!
The $15,978 Social Security bonus most retirees completely overlook
If you're like most Americans, you're a few years (or more) behind on your retirement savings. But a handful of little-known “Social Security secrets” could ensure a boost in your retirement income. In fact, one MarketWatch reporter argues that if more Americans knew about this, the government would have to shell out an extra $10 billion annually. For example: one easy, 17-minute trick could pay you as much as $15,978 more... each year! Once you learn how to take advantage of all these loopholes, you could retire confidently with the peace of mind we're all after. Simply click here to discover how you can take advantage of these strategies.
If you're like most Americans, you're a few years (or more) behind on your retirement savings. But a handful of little-known “Social Security secrets” could ensure a boost in your retirement income. In fact, one MarketWatch reporter argues that if more Americans knew about this, the government would have to shell out an extra $10 billion annually. For example: one easy, 17-minute trick could pay you as much as $15,978 more... each year! Once you learn how to take advantage of all these loopholes, you could retire confidently with the peace of mind we're all after. Simply click here to discover how you can take advantage of these strategies.
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