BOSTON -- There's a wide gap between what clients think they know about Social Security, and what their advisors say their clients know, according to a new survey.
Fewer than one in ten consumers say they are very knowledgeable about how Social Security benefits are determined – and that figure may be optimistic as a mere 1% of CFPs say their clients are that knowledgeable, according to the survey which was conducted by AARP and the Financial Planning Association.
Only about one-third of CFPs say their clients are even somewhat knowledgeable about claiming Social Security benefits.
"It can be hard to make the right decisions, and it can be even harder if you don't have the basic facts," says Jeanine English, AARP president, who spoke at a press conference during the Financial Planning Association's annual conference.
English says that bad decisions can affect the client as well as their family.
The report's authors say that their study not only underlines the importance of understanding Social Security benefits but also the opportunities for planners to educate clients.
CLIENT ESTIMATES ARE OFF
The survey found that 83% of clients overestimated or underestimated the amount of money they would receive if they waited to become beneficiaries at their full retirement age. That misinformed view of Social Security benefits can have a real impact on a client's retirement.
And, perhaps not surprisingly, many planners said that Social Security would be a major source of retirement income for their clients.
Part of the explanation of why so many clients are misinformed or under-informed about Social Security may be due to the fact that they aren't consulting with a professional. According to survey data, 16% of those polled say they get their information from a financial professional compared with 46% who said they get it from friends and family.
"Unless their friends and family work at the Social Security administration, then they might not be getting the knowledge that they need," says FPA President Edward Gjertsen.
To help remedy this situation, the FPA is teaming with AARP to offer more educational resources to Americans.
"We are almost drowning in financial literacy. There is a lot out there. But the challenge is connecting that knowledge with the individuals who need that knowledge," Gjertsen says.
"We have identified this gap and we are working together to close that gap," English adds.
For the client side, the study surveyed about 1,200 adults between the ages of 45 and 64 who do not yet receive Social Security benefits, while on the professional side, the FPA surveyed nearly 1,300 CFP professionals.