As you know, Social Security offers two types of benefits for spouses: spousal and survivor benefits. Ideally, married individuals think about the impact of their Social Security choices on their spouse. However, if people do not fully understand the rules for the spousal and survivor benefits, they may make suboptimal choices, not only about Social Security claiming, but perhaps also about labor and marriage decisions. This paper from the University of Michigan uses new data from the Understanding America Study to assess understanding of these benefits. Overall, the results suggest that knowledge of spousal and survivors benefits is low. Furthermore, people’s perceptions of their knowledge is misaligned with their actual knowledge, with many thinking that they know more about Social Security than they actually do.
You can find the full paper, including methodology and sample sizes, here. The following are just some of the results.
Regarding spousal benefits:
- Only 46% of respondents have heard of spousal benefits, whereas 55% have heard of survivor benefits.
- Only 27% knew that spousal benefits are available to couples married for one year or longer—38% chose the “don’t know” option.
- 22% believe that claiming spousal benefits will lower the benefit amount for the primary beneficiary.
- Those with high financial literacy were more knowledge—but still answered less than 2 out of 5 questions correctly.
Regarding survivor benefits:
- 46% incorrectly responded that if a widow/widower ever rememarries, he/she is ineligible for survivor benefits.
- Only 38% are aware that a former spouse may be eligible for survivor benefits.
- 50% don’t know the maximum survivor benefit amounts, 17% incorrectly think it is the survivor retirement benefit plus own benefit.
- Similar to knowledge of spousal beneifts, even among those with high financial literacy the average number of correct responses is less than two.
The researchers conclude that knowledge of spousal and survivors benefits is low. Individuals who are misinformed or uninformed about benefits may not optimally plan for retirement, or may fail to apply for benefits for which they are eligible. This is good news for advisors, as it shows that your services are still desparately needed.