Racial and Ethnic Disparities in Knowledge about Social Security Programs

Imperfect knowledge of public programs influences use and can lead to suboptimal decisions. We quantify significant disparities in Social Security program knowledge across race and ethnic groups. Differences in knowledge are not explained by differences in income, wealth, employment history, or educational achievement. We find evidence that there are racial/ethnic differences between perceived and actual knowledge of Social Security programs as well as differences in financial literacy, an important component of retirement planning. To identify mechanisms for alleviating these disparities, we investigate how knowledge relates to information sources about Social Security across race and ethnic groups. We find that Black and Hispanic respondents, on average, have fewer information sources. This gap corresponds to a difference in the ability to collect information from friends and family. Additional sources of information predict knowledge scores, even after accounting for confounders. The impact of racial and ethnic disparities in Social Security knowledge on post-claiming outcomes remains unclear. We present some suggestive evidence from retirement beneficiaries of a relationship between knowledge differences and subjective perceptions about the benefit claiming decision. Understanding causal mechanisms connecting racial and ethnic disparities in knowledge and outcomes likely requires an experimental design.