Rude Awakenings for Many Current and Future Social Security Beneficiaries

In this Guide...

A new study reveals older adults' lack of knowledge about Social Security benefits could prove financially dire. One common mistake could cost seniors approaching age 65 more than $36,000 over 15 years of their retirement.

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Most of us envision the day we retire as a dream come true. But for many of today’s soon-to-be retirees, that big day may be more like a rude awakening.

Our survey of 1,000 U.S. adults ages 55 and older, the majority of whom were under age 65, revealed some common misunderstandings about the Social Security program that could have dire financial consequences for new retirees.

Key Findings

2 out of 3 seniors mistakenly believe they will qualify for full Social Security benefits at age 65

The truth:
Unless you were born before 1943, you must be at least 66 years old in order to qualify for full Social Security retirement benefits. People born in 1960 or later must wait until they are 67 to retire if they want to receive their full retirement benefits amount. 

Why it matters: A 65-year-old who began taking Social Security this year (meaning they were born in 1956) would collect only 91% of their full retirement benefits amount and would be locked into that percentage for life. In this case, a beneficiary otherwise entitled to the average monthly retirement benefit would miss out on $1,667 in lost earnings in 2021 alone and would continue to leave thousands of dollars on the table every year throughout retirement.1

If a 55-year-old were to retire in ten years rather than at their full retirement age, they’d only receive 86.6% of their full retirement benefits. For our younger survey takers who incorrectly believe they can retire with full benefits at age 65, they could cost themselves over $2,400 per year in retirement. This equals more than $36,000 of lost income in 15 years of retirement.

As Social Security benefits account for roughly 33% of American senior income, even slight fluctuations in benefit amounts can have incredible impact on those who rely on a fixed income.1

Graphic showing percentage of older adults who think their full retirement age will be 65

Half of seniors drastically overestimate how much Social Security pays out in a Lump Sum Death Payment after the death of a spouse

The truth:
The Social Security Lump Sum Death Payment is a one-time payment of just $255. 

Why it matters: The median cost of a funeral is more than $9,000. Many people may not set aside money for a funeral, and some may avoid buying final expense insurance because of their false sense of hope in Social Security’s death payment. 

Graphic showing percentage of seniors who overestimated how much Social Security pays for a lump sum death payment

1 out of 3 older adults incorrectly believe Social Security will pay out survivor benefits retroactive to the time their spouse passed away

The truth:
Survivor benefits begin the month in which the survivor files for benefits, not the month in which the death occurred. 

Why it matters: Delaying application for survivor’s benefits for even one month could cost an individual nearly $4,000 if receiving the max benefit, and more than $1,500 with the standard amount. 

Over a third of seniors mistakenly believe Social Security retirement benefits include health insurance coverage

The truth:
Social Security provides beneficiaries with a monthly check but does not include health insurance coverage or any health benefits. 

Why it matters: If you think Social Security benefits include health insurance, you may not enroll in Medicare at the correct time. And if you don’t enroll in Medicare on time, you can incur late enrollment penalties that you may be forced to pay every month for the rest of your life.

Delaying Medicare Part B medical insurance enrollment for just one year, for example, could cost a senior more than $350 per year, depending on their income. This late enrollment penalty would continue to be in place for the rest of their life, and the penalty amount would increase as Medicare Part B premiums increase.

Graphic showing percentage of older adults who think Social Security includes health insurance coverage

General Lack of Understanding About Social Security

Our survey respondents displayed a general lack of knowledge surrounding Social Security and the benefits it pays.

For starters, 36% of those surveyed believe they will receive full Social Security benefits at age 65. But even the oldest participants in our survey won’t be eligible to receive a full Social Security check unless they wait until after their 66th birthday to start claiming their benefits.

Individuals who turn 65 in 2021 and claim Social Security would collect just 91% of their benefits and would be locked into that 91% threshold for life. Over the course of 15 years in retirement, that decision could cost them more than $25,000. Anyone born in 1960 or later must wait until age 67 to qualify for their full benefit amount. 

Many seniors also displayed a false sense of security about how much money they will receive from Social Security after their spouse passes away. Social Security pays a Lump Sum Death Payment of just $255, an amount that only 13% of respondents could correctly identify in a multiple choice format. 

More significantly, 50% of seniors overestimated the amount Social Security will pay out for this death benefit, which could drastically affect their funeral preparation and budgeting. 

Not only are seniors misguided about the one-time lump sum amount, but they are also ill-informed about the monthly survivor benefits paid by Social Security following the death of a spouse, parent or child. 

One-third of seniors incorrectly believe that Social Security will make monthly survivor payments that are retroactive to the month in which their spouse died. But these payments actually don’t begin until the month you file for them and are not paid out retroactively. 

In many cases, the widow or widower of a deceased person who was not receiving Social Security payments is eligible to begin receiving their deceased partner’s payments themselves, or may be eligible to receive an amount that is higher than the surviving person’s current benefits. 

But those are not paid out retroactively, so every month you wait to apply is a month of wasted money. 

A lot of the confusion about Social Security benefits may be rooted in the fact that more than one out of three older adults think the program includes health insurance coverage.

This is of course not the case, despite the Social Security Administration being closely tied to Medicare. Retirees must enroll in Medicare in order to receive health insurance benefits, and many seniors must take action to enroll in Medicare manually. 

Not enrolling in Medicare in a timely manner can prove costly. The late enrollment penalty for Medicare Part B is equal to 10% of the standard premium for every 12-month period you weren’t enrolled though you were eligible, and you must continue to pay the penalty every month that you remain enrolled. In 2021, that’s an extra $14.85 every month, or $178.20 for the year, though this amount would be double if a beneficiary waits longer than a year to enroll.

Other parts of Medicare, including Part D prescription drug coverage, also come with late enrollment penalties.

Confusion About the Social Security Program and Its Future

The above findings can be largely explained by one additional truth. Six out of 10 seniors agree that the Social Security program is “difficult to understand and confusing.” Only 12% of seniors disagreed with that statement.

Graphic showing how many seniors think Social Security is confusing and difficult to understand

Seniors cited low confidence in their knowledge of Social Security benefits, and many are short on confidence in the program itself.

More than four out of 10 seniors believe Social Security will be bankrupt within 20 years and won’t be able to pay out any benefits. While it’s true that the program’s trust fund is on pace to become insolvent before that time, insolvency in the trust fund doesn’t necessarily mean Social Security will be out of money and unable to issue benefits. 

Graphic showing when respondents think Social Security will go bankrupt

Three-quarters of seniors falsely believe that the federal government has “borrowed” from Social Security or used the funds for other purposes. While this is not an uncommon belief, it’s also not exactly true.

Graphic highlight of percentage of older adults who think government misuses Social Security funds


Many soon-to-be retirees lack critical knowledge about Social Security benefits, which can cost them financially and hinder their ability to prepare adequately for retirement. We find that some of the most common points of confusion about Social Security benefits could cost older adults tens of thousands of dollars over the course of their retirement.


The data used for this comes from a survey conducted on Prolific, an online survey platform. It was conducted on June 18, 2021. There were a total of 1,000 respondents. To qualify, respondents had to be 55 years old or older, and the majority of respondents (608) were between ages 55 and 65.

Participants were filtered based on completion time and failure to follow written instructions within the survey.

Margin of error: +/- 4% (95% confidence interval). This survey relies on self-reported data.

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