	Lack of Understanding of Key Social Security Information, Along with Financial Need and Other Factors, May Contribute to Individuals Claiming Benefits Early

Our review of surveys and academic studies, and interviews with people  with Social Security expertise, suggest that most individuals do not  understand key details of Social Security rules that could potentially affect  their retirement benefits or the benefits of their spouses and survivors. For  example, while some people understand that delaying claiming leads to  higher monthly benefits, many are unclear about the actual amount that  benefits increase with claiming age. Understanding these rules and other information, such as life  expectancy and longevity risk, could be central to people making  informed decisions about when to claim benefits. With an understanding  of Social Security benefits, people would also be in a better position to  balance other factors that influence when they claim benefits, including  financial need, poor health, and psychological factors. SSA Provides Key Claiming Information on Its Website and in Publications, but Not Consistently during the Claiming Process

SSA makes comprehensive information on key rules and other  considerations related to claiming retirement benefits available through its  website, publications, personalized benefits statements, and online  calculators. While important information is provided through SSA’s website and  publications to help people make informed decisions about when to claim  retirement benefits, our observation of 30 claims interviews in SSA field  offices and of a demonstration of the online claims process found that  some key information may not be consistently provided to potential  claimants when they file. The POMS  also specifies that when taking an application for Social Security benefits,  the claims specialist is responsible for explaining the advantages and  disadvantages of filing an application so that the individual can make an  informed filing decision. The following summarizes key information that was not consistently  covered during the in-person claims process. However, the remaining 8 did  not discuss this option. Similarly, the online application process does not inform claimants  that benefits are based on the highest 35 years of earnings. Similarly, the  online application process does not inform claimants that life  expectancy and longevity risk are important considerations in deciding  when to claim. Specifically, we recommend that SSA take steps to ensure that: when applicable, claims specialists inform claimants that delaying  claiming will result in permanently higher monthly benefit amounts,  and at least offer to provide claimants their estimated benefits at their  current age, at FRA (unless the claimant is already older than FRA),  and age 70;  claims specialists understand that they should avoid the use of  breakeven analysis to compare benefits at different claiming ages; when applicable, claims specialists inform claimants that monthly  benefit amounts are determined by the highest (indexed) 35 years of  earnings, and that in some cases, additional work could increase  benefits; when appropriate, claims specialists clearly explain the retirement  earnings test and inform claimants that any benefits withheld because  of earnings above the earnings limit will result in higher monthly  benefits starting at FRA;  claims specialists explain that lump sum retroactive benefits will result  in a permanent reduction of monthly benefits.
Why GAO Did This Study

This testimony summarizes the information contained in GAO's September 2016 report, entitled Social Security: Improvements to Claims Process Could Help People Make Better Informed Decisions about Retirement Benefits ( GAO-16-786 ).

What GAO Found

GAO's review of nine surveys and academic studies, and interviews with retirement experts, suggest that many individuals do not fully understand key details of Social Security rules that can potentially affect their retirement benefits. For example, while some people understand that delaying claiming leads to higher monthly benefits, many are unclear about the actual amount that benefits increase with claiming age. The studies and surveys also found widespread misunderstanding about whether spousal benefits are available, how monthly benefits are determined, and how the retirement earnings test works. Understanding these rules and other information, such as life expectancy and longevity risk, could be central to people making well-informed decisions about when to claim benefits. By having this understanding of retirement benefits, people would also be in a better position to balance other factors that influence when they should claim benefits, including financial need, poor health, and psychological factors.
The Social Security Administration (SSA) makes comprehensive information on key rules and other considerations related to claiming retirement benefits available through its publications, website, personalized benefits statements, and online calculators. However, GAO observed 30 in-person claims at SSA field offices and found that claimants were not consistently provided key information that people may need to make well-informed decisions. For example, in 8 of 26 claims interviews in which the claimant could have received higher monthly benefits by waiting until a later age, the claims specialist did not discuss the advantages and disadvantages of delaying claiming. Further, only 7 of the 18 claimants for whom the retirement earnings test could potentially apply were given complete information about how the test worked. SSA's Program Operations Manual System (POMS) states that claims specialists should explain the advantages and disadvantages of filing an application so that the individual can make an informed filing decision. The problems we observed during the claims interviews occurred in part because the questions included in the claims process did not specifically cover some key information.
Online applicants have more access to key information on the screen or through tabs and pop-up boxes as they complete an application. However, similar to in-person interviews, the online application process does not inform claimants that benefits are based on the highest 35 years of earnings or that life expectancy is an important consideration in deciding when to claim.