New research from Fidelity Investments confirms that a majority of Americans close to retirement age don’t have a clue when it comes to their Social Security benefits. Nearly half (45 percent) of 61-year-olds plan to file for benefits when they become eligible at 62, despite the actuarial reality that most will do much better waiting until Normal Retirement Age, which is 66 for people born between 1943 and 1954. And 56 percent couldn’t correctly identify that, either.

More bad news from Fidelity:

More than half (54%) are unaware that they need to file for their benefit three months in advance of the date they wish to start receiving payments. Seven percent of respondents incorrectly believe that the Social Security Administration (SSA) will contact them when it is time to receive benefits. Nearly one third (31%) also believe that Social Security payments are not taxable, and 12 percent were not aware that working in retirement could impact their benefits.

There is also confusion among 61 year‐olds regarding spousal benefits. Nearly three quarters (72%) do not know that a non‐working or lesser‐earning spouse could be eligible for Social Security based on a higher‐earning spouse’s work history alone; and a full 64 percent answered incorrectly when asked what percent of their spouse’s benefit they could be eligible for (up to 50%). Half (51%) also are not aware that when a spouse passes away, the surviving spouse may be eligible to receive the larger of their two Social Security payments.

Social Security accounts for more than one-third of income for most retirees–maybe more now, considering the stock market meltdown. So the need to get smarter about Social Security is obvious.

Fidelity has launched a new page of Social Security decision-making resources; also check out the Social Security Administration’s Retirement Estimator and my page of Social Security resources.

Tags | Social Security