PLANSPONSOR - August/September 2020 - 39

WELLNESS STRATEGIES
retirement, Nationwide finds.
Amid the pandemic, an increase
in early retirements among Americans
worried about their health risks on the job
would not surprise Collinson. " As we get
older, we can be more susceptible to health
problems, " she says. " And experts have
specifically warned older individuals about
being vulnerable to COVID-19. "
A major economic downturn also can
lead to more people taking Social Security
early. During a recession, " our research
has found that it's more difficult for older
workers than younger workers who've been
laid off to find employment, and it takes
longer, " Collinson says. And many of them
don't have adequate savings or income, so
even though it's a steeply reduced monthly
Social Security benefit, they need the
money and start taking benefits. "
Some Americans likely take Social
Security early because they overestimate
how much they will get in monthly
payments, says Tina Ambrozy, senior vice
president, strategic customer solutions at
Nationwide Financial in Columbus, Ohio.
" Social Security is not meant to be the
whole source of someone's income in retirement, "
she says. But many Americans have
not learned the basics of Social Security.
" There's a lot of misunderstanding about
how it works: Most folks we surveyed don't
know the rules, " Ambrozy says. " Many
believe that if they take their benefit early,
their monthly benefit will then 'step up' to
the full benefit when they reach full retirement
age. Folks retire early and lock in a
benefit with misconceptions about what
will happen, and then they're surprised
they got less than they expected. "
Fifty-one percent of Boomers
surveyed by Nationwide also said they
strongly agree or somewhat agree that
Social Security benefits will get reduced
imminently by the federal government.
" There's also an element of 'Get what
you can,' " Ambrozy says. " When you add
those fears to the misunderstandings
that people have about the system, that
has created a problem. "
What Sponsors Can Do
Uncertainty about their retirement
timing leads many people to feel anxious.
As of May, among Americans who feel the
most uncertainty about when they will stop
working full time, one in three said they
have anxiety and are concerned about their
financial future, according to a survey by
consumer finance research and analytics
company Hearts & Wallets LLC in Rye,
New York. Of those, 13% said they have
high anxiety about their financial future.
The timing is actually good for
offering pre-retirees Social Security
education, Collinson says. " Research has
found that major life events are when
people are most likely to think about,
and engage with, financial planning, "
underlying factors such as that person's
earnings history. " Estimates are only as
good as the underlying assumptions, "
Collinson says. " Just like other retirement
calculators, you should pay close attention
to the underlying assumptions used. "
* Provide Social Security optimization
resources. A plan's recordkeeper can
help provide education on Social Security
basics and tools to help with decisionmaking.
For example, Nationwide's
Social Security 360 Analyzer tool allows
a financial adviser to run scenarios of
how retiring at different ages affects
what an individual gets in monthly
benefits. " It allows employees to clearly
see the impact of different timing decisions, "
Ambrozy says. The adviser can
Americans most often start taking
Social Security benefits at age 62,
the earliest possible timing.
she says. " With the pandemic, and its
widespread health issues and upheaval
in the employment market, this is a time
when the audience is likely listening and
seeking information. Many older workers
may be thinking, 'Life's too short. Maybe
this is a good time to retire.' "
Consider these three steps to help:
* Encourage pre-retirees to see their
Social Security benefit estimate. The
Social Security Administration (SSA)
used to mail an individualized benefit
projection to American workers every
year, but now people have to register on
the SSA site and access it online. Those
who do can see an individualized projection
of the big difference in their monthly
benefit if they start taking benefits at age
62, at their full retirement age or at age
70. " It is really important for people to
do, " Collinson says.
But people should keep in mind that
the SSA's monthly benefit projections are
estimates, based on assumptions about
then use the report the tool produces to
help a pre-retiree decide when it is best to
start taking benefits, depending on his
individual situation.
* Give pre-retirees help to make a realistic
plan. Only 24% of American workers
have a written retirement plan, TCRS
research finds, and Collinson encourages
employers to work with their providers to
help pre-retirees put a plan together.
Laura Varas, founder and CEO of
Hearts & Wallets, says pre-retirees worried
about their finances need to get a realistic
handle on both their expenses in retirement
and the retirement income they will
require. " The No. 1 issue to resolve is that
the average American devotes 40% of his
spending to his home, and people can't
keep that up in retirement, so they need
to optimize their housing situation before
retiring, " she says of expenses. " No. 2
is getting their debt paid off. And third,
people need to mentally prepare to spend
less in retirement. " -Judy Ward
PLANSPONSOR.COM August - September 2020 39
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