Academic journal article Social Security Bulletin

How Effective Is the Social Security Statement? Informing Younger Workers about Social Security

Academic journal article Social Security Bulletin

How Effective Is the Social Security Statement? Informing Younger Workers about Social Security

Article excerpt

Introduction

In 1995, the Social Security Administration (SSA) began large-scale mailings of earnings and benefit statements to workers.1 One of the statement's primary purposes was to provide workers with information on their Social Security benefits and to help them plan their financial futures. The Social Security Statement has been widely acknowledged as one of the most important of federal government communications with the public (Jackson 2005).2 It stands as the largest customized mailing ever undertaken by a federal agency (SSA n.d.). Developing and distributing the Statement each year required a massive effort in terms of resources and work hours.

To date, research assessing the Statement's effect on public knowledge about Social Security has focused on older workers approaching retirement (Mastrobuoni 2009; Biggs 2010; Greenwald and others 2010; Liebman and Luttmer 2010). Even SSA-commissioned research, based on surveys conducted between 1998 and 2004 to measure the Statement 's effect on public understanding of Social Security programs and benefits, emphasized the impact on older workers.

We decided to focus instead on younger workers, in part because of the changing nature of retirement income. Younger workers are less likely than older workers to be covered by defined benefit pension plans and more likely to be responsible for their own retirement security. For them, Social Security benefits are bound to be increasingly significant. Thus, it is essential that younger workers understand how different factors might affect the Social Security benefits they can expect to receive. Younger workers are also of interest because, although in a position to benefit most from additional information, they are less likely than older groups to seek it.3 For these reasons, we assessed how much younger workers know about Social Security, identified their knowledge gaps, and considered ways to provide them with additional information.

In addition to its focus on younger workers, this article contributes to the literature on the impact of the Statement by looking at changes over time in the public's understanding of Social Security. Most other studies focus on a single year and compare individu- als who received a Statement that year with those who did not. Using surveys commissioned by SSA, we were able to look at a group of younger workers who had not received the Statement at the time of the first survey and contrast them with workers of the same age who had received a Statement at the time of a later survey. This enabled us to observe the increase in knowledge associated with receipt of the State- ment. It also enabled us to compare groups of younger workers who had not received the Statement in either year and observe whether knowledge about Social Security changed even in its absence. In addition, we used a unique source of information in the analysis: the surveys conducted by the Gallup Organization in 1998 and 2001.

We assessed how younger workers' understand- ing of Social Security, in both broader program-level aspects and narrower benefit-specific aspects, changed across time and with receipt of the Statement; and we found that Statement receipt is associated with large and statistically significant increases in knowl- edge. Younger workers who received the Statement were very knowledgeable about the programs that Social Security offers.4 Particularly wide majorities understood that payroll taxes finance benefits and that benefit levels depend on lifetime earnings. However, far fewer young people knew that the full retirement age (FRA)-the age at which one becomes eligible for full retirement benefits-would begin rising incremen- tally in 2003, and even fewer were aware that benefits are inflation-indexed. In the article's Conclusion, we discuss how being unaware of those facts might nega- tively affect the retirement security of younger work- ers and suggest approaches SSA might take to address that knowledge gap. …

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