Many still misunderstand Social Security

For all their misgivings about the future of Social Security, American workers are surely counting heavily on it to fund their retirement.

All the more worrisome, then, is that the vast majority of workers, despite seven years of personal reminders, still don’t realize that the age to receive full Social Security benefits is being raised gradually, and therefore is likely higher than they think.

These facts emerge from this year’s 16th annual Retirement Confidence Survey, a major study of Americans’ attitudes toward savings and retirement planning. The survey, which has been conducted since 1991 by the not-for-profit Employee Benefit Research Institute and the research firm Mathew Greenwald & Associates, is one of the most thorough and comprehensive on the subject. We look at it each year to look for trends and - we hope - better results.

Unfortunately, there has been hardly any improvement in Americans’ understanding of the age-eligibility rules for Social Security benefits. That’s discouraging, considering the Social Security administration has been mailing annual personal benefit-estimate statements explaining the rules to all workers 25 and over since 1999, and the news media have been full of stories about them. The “new” age rules aren’t even new; they were approved by Congress in 1983 but did not go into effect until the new century.

To try to dispel any lingering misconception, the “traditional” retirement age of 65 is no longer the age to begin receiving full Social Security benefits and hasn’t been since 2002.

The age to collect full benefits depends on when we were born, and is rising gradually, two months at a time, until it reaches 67 for those born in 1960 and later. For anybody born between Jan. 2, 1943, and Jan. 1, 1955, like us, the eligibility age for full benefits is 66. Reduced benefits are still available at age 62 but the reduction is bigger now than it was when full retirement age was 65.

Among the 1,000 workers interviewed for this year’s survey, only 19 percent knew the correct age at which they would be eligible for full benefits. Among those 55 and older, who are closer to retirement, only 40 percent knew.

By contrast, 16 percent of all workers, and 18 percent of those 55 and over, thought they would be eligible for full benefits four or more years before they are. And 33 percent of all workers, and 26 percent of those 55 and over, thought it was one to three years earlier.

That’s a total of 49 percent of all workers, and 44 percent of those 55 and over, who are counting on benefits they won’t get. In addition, 22 percent of all workers, and 9 percent of those 55 and over, acknowledged they don’t know when they will be eligible for full benefits.

These results are only marginally better than those in last year’s survey - when, again, only 19 percent of workers knew the correct age to receive full benefits but a larger number, 52 percent, thought they would be eligible before they actually are. In 2004, 54 percent did.

This is a dangerous ignorance when you take into account the importance today’s workers place on their future benefits. Among all workers, Social Security benefits were listed as the second biggest expected source of income in retirement, after personal savings. Among workers with no retirement savings of their own - a sobering 30 percent of the total - Social Security benefits were listed as the top expected source of income, just as it is for current retirees.

Yet, two-thirds, or 67 percent, of all workers said they weren’t confident that Social Security will continue to provide benefits of at least equal value to benefits received by retirees today. While skepticism about Social Security has remained relatively constant in recent years, the level of confidence is still higher than in 1996, when 78 percent of workers were not confident.

Write to Humberto and Georgina Cruz at or