Fidelity Investments Reports Nearly Half of 61 Year-Olds Plan to Start Taking Social Security as Soon as Eligible

Business Wire, Oct 27, 2008

Financial Needs and Health Concerns Cited As Top Factors in Decision to Begin Receiving Benefits at Age 62

BOSTON -- In a new survey1 released today, Fidelity Investments reports that nearly half (45%) of Americans age 61 today are planning to begin taking Social Security at the age of 62, the first year that eligible recipients can apply. The top reasons driving their decision to collect early are immediate financial needs and health and longevity concerns.

Of those who plan to begin drawing down at age 62, more than three quarters (77%) will use the funds to pay for basic living expenses, such as food, utility costs and mortgages. This group expects their Social Security payments to comprise as much as half (49%) of their total retirement income, yet when asked to quantify their Social Security payments, only 22 percent knew exactly how much their check will be. Nearly three quarters (73%) of those planning to start taking Social Security at age 62 are also making their decision without having a formal retirement income plan.

"Many Americans who are within one year of beginning to collect their Social Security retirement benefits may be planning to rely too much on it, considering Social Security currently only funds a little more than one-third, or 37 percent, of an average retiree's income2 ," said Carolyn Clancy, executive vice president, Fidelity Investments Personal and Workplace Investing. "Social Security-related decisions can be complex and there can be trade-offs associated with the various payment strategies. But with some basic guidance and a lifetime retirement income plan, individuals may find it easier than they think to make an informed decision and get the most from their benefits."

Need for Greater Understanding of Social Security Basics

While more than three quarters (77%) of 61 year-olds report knowing when they will start taking Social Security, many show a very limited awareness of basic Social Security knowledge needed to make an informed decision. When quizzed about issues such as filing requirements and taxation, a vast majority (85%) correctly identify age 62 as the earliest possible age that people may become eligible for Social Security, but 56 percent do not know when they will be eligible for full Social Security benefits (age 66 for those born 1943-54).

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.

New Resources for Those Making Social-Security Related Decisions

To help Americans better understand their Social Security options, and how it can impact their retirement income, Fidelity has introduced a series of new educational resources, including:

* Dedicated online content at Fidelity.com/socialsecurity to help investors become more informed about Social Security and better understand how these benefits fit into their overall retirement income plan. The new content includes: simplified, easy-to-understand information on Social Security benefit decisions; examples illustrating how key factors, such as age, can impact Social Security payment amounts; a printable table showing common strategies to consider when deciding when to take benefits, and resources to help create a retirement income plan, including a Social Security payment estimate, using Fidelity's Retirement Income Planner tool.

* A customer brochure with Social Security-related information including the five key steps to becoming Social Security-ready, and four critical factors (age and longevity, working in retirement, taxation, and spousal benefits) for everyone to consider before they make a final decision.

* New informational materials that outline the benefits of creating a retirement income plan, as well as how to get started.

* A new educational audio program on Fidelity.com with information from the Social Security Administration to help people better understand the program and the options available regarding when to receive benefits.

* Local seminars, held in conjunction with the Social Security Administration, in Fidelity Investor Centers nationwide to help individuals better understand their Social Security options.