JUL. 30, 2020
Perhaps more so than any other generation before them, Millennials (defined as those born between 1981-1996) have been saddled with the brutal losses brought on by two major economic crises in their lifetimes. What began for many as a coming of age experience in 2008 – during what was then considered to be the worst economy and job market since the Great Depression – is now taking hold all over again as a result of the COVID-19 pandemic and global market volatility. Factors like soaring student debt, stagnant wages and a lack of wealth-building through home ownership and stock market investment that previous generations were able to achieve has left a significant number of Millennials unable to gain financial traction. Recent changes to retirement account distribution rules in the CARES Act waived some of the penalties and fees associated with withdrawals retirement accounts. As unemployment surged this spring to record levels not seen since the Great Depression, many Americans took advantage of this in order to make ends meet.
However, two recent surveys1, conducted by The Harris Poll on behalf of The Nationwide Retirement Institute® – both during and before the COVID-19 pandemic began – show that as the pandemic continues to upend markets and the workforce across the world, many Americans (24% of those surveyed) are looking for advice from a financial professional for the first time. In fact, this data highlights an opportunity to engage with clients in a holistic manner in order to help them better understand their options and achieve their goals. Results from these surveys also highlight that clients, in particular younger clients (94% of Millennials, 92% of Gen Xers), have a desire to learn more about Social Security – and they expect their financial professional to provide it or make it available. Research tells us that financial professionals who help clients solve this part of the retirement income puzzle are more trusted and more retained than those who don’t.
Demystifying Social Security for clients
Even though it has been a key component of retirement income for Americans for 85 years now, Social Security is still somewhat of a black box to many – and they want a financial professional’s help figuring it all out.
General misconceptions and uncertainty around Social Security are abound and need to be addressed. Effective retirement planning begins by properly educating consumers about Social Security benefits. Of the younger generations (Millennials and Gen Xers), less than half are confident in their knowledge of Social Security. Our survey data shows that, in today’s everchanging environment, there is still more work to be done. For example, some other common misconceptions and uncertainties around Social Security include:
- The (incorrect) belief that if adults claim benefits early, their benefits will go up automatically when they reach full retirement age (Only 45% Millennials, 49% Gen Xers correctly identify that this statement is false)
- Not understanding eligibility – nearly all Millennials (97%) and most Gen Xers (90%) incorrectly identify the age at which they are eligible for full benefits
- Fewer than one in ten adults know all of the factors that determine the maximum benefit (4% Millennials, 6% Gen Xers)
- Half or more say they do not know how much of their income will be replaced in retirement by Social Security (49% Millennials, 49% Gen Xers)
- And future retirees who are over the age of 50 expect to receive a higher Social Security payment ($1,572) than what long-term retirees over the age of 50 report receiving ($1,380) – a difference of $192.
The pandemic has many seeking guidance for the first time
Prior to the pandemic, a majority of adults worried Social Security would run out of funding in their lifetime, and many felt they would need to continue working because the program wouldn’t pay enough in benefits. It’s not far off – experts have predicted that if no changes are made, the Social Security Administration estimates that the program’s reserves could run out by 2035 or 2036 – just 15 years from now2. The impact of the pandemic has, according to a more recent study, shaved roughly four years off that number3. While many retirees receive Social Security as a source of retirement income, COVID-19 has adults across generations (61%) even more worried than before about Social Security running out of funding.
While concerns about saving enough and being financially prepared for retirement were present even before the pandemic, more than a third of Americans (38%) say their retirement plans have been impacted and many feel they will have to retire later than planned (19%) or won’t be able to retire at all (10%).
The younger generations, while they are not yet eligible to receive Social Security, have a strong desire to learn more on the topic. In particular, more than any other generation, Millennials (29%) would prefer to talk to a financial professional to learn more about Social Security and how to maximize benefits. Significant majorities of Millennials (86%) and Gen Xers (93%) are likely to switch to a financial professional for this reason alone.
Help clients overcome complex retirement challenges
With anxiety over personal finances and confusion around how to plan effectively for retirement, many are looking to financial professionals for guidance. Having more in-depth conversations around understanding and maximizing Social Security benefits can go a long way in easing concerns that clients have during these uncertain times. The Nationwide Social Security 360 Analyzer® can help you better assess a client’s goals around the optimal time to claim Social Security.
1 The COVID-19 Social Security survey was conducted online within the United States between May 15-19, 2020 among 2,026 adults aged 18 and over by The Harris Poll on behalf of The Nationwide Retirement Institute® via its Harris On Demand omnibus product.
Nationwide Retirement Institute’s seventh annual Social Security survey conducted February 19-March 6, 2020 among 1,727 U.S. adults age 24 or older who currently collect or plan to collect Social Security benefits.
Respondents for these surveys were selected from among those who have agreed to participate in our surveys. Because the sample is based on those who agreed to participate in the online panel, no estimates of theoretical sampling error can be calculated. Data are weighted where necessary by age by gender, race/ethnicity, region, education, income, marital status, and propensity to be online to bring them in line with their actual proportions in the population.
2 Summary: Actuarial Status of the Social Security Trust Funds. Social Security Administration, April 2020, https://www.ssa.gov/policy/trust-funds-summary.html.
3 Shin, Sophie, et al. The Impact of the Coronavirus Pandemic on Social Security’s Finances. University of Pennsylvania, 28 May 2020. https://budgetmodel.wharton.upenn.edu/issues/2020/5/28/social-security-finances-coronavirus.