47% of American Pre-Retirees Failed This Basic Social Security Quiz -- Can You Pass It?

Of Americans age 50 or older, 47% failed to pass a five-question Social Security quiz, according to a recent MassMutual survey. While this is somewhat better than a previous survey by the same company three years ago that found a 62% failure rate, this is still alarming. After all, Social Security is the largest retirement program in the U.S., covering the vast majority of senior citizens.

Here's the quiz, followed by the correct answers and explanations behind each one.

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The quiz

Let's take a look at the five-question quiz that just over half of Americans age 50 or older could pass, which is defined as scoring above 60%. See how many you can get correct, before scrolling down to the answers below.

All five questions are true/false:

1. Under current Social Security law, my benefits will not be reduced if I claim them at age 65.
2. My spouse is eligible to receive Social Security retirement benefits, even if he or she has no individual earnings history.
3. If my spouse dies, I will continue to receive both my own benefit and my deceased spouse's benefit; the total Social Security benefits I receive will not change.
4. Social Security retirement benefits are based on my earnings history; I'll receive the same monthly benefit amount whether I start collecting before or after my full retirement age.
5. If I am still working when I claim my Social Security, my benefit might be reduced, depending on my earnings and my age.

The answers -- how did you do?

1. Under current Social Security law, my benefits will not be reduced if I claim them at age 65.

This is FALSE and was the most frequently incorrect question on the quiz, with less than half of respondents getting it right.

One common Social Security misconception is that full retirement age is 65 years old. There are several reasons for this. The eligibility age for Medicare is 65, and many other public-sector retirement plans use 65 as their full retirement age.

However, for Social Security purposes, full retirement age is between 66 years old and 67 years old, depending on the year you were born. If you claim Social Security before you reach your full retirement age, your benefit will be permanently reduced.

1. My spouse is eligible to receive Social Security retirement benefits, even if he or she has no individual earnings history.

This is TRUE, and only 54% of respondents knew this. Social Security has a program called spousal benefits designed to provide retirement income to spouses who either didn't work or earned relatively little compared with the primary-earner. The basic idea of spousal benefits is that your spouse can be entitled to a benefit of as much as half of your full retirement benefit, even if they never worked. In other words, if you are entitled to a monthly Social Security retirement benefit of $2,000, your spouse could receive as much as $1,000 per month as well.

1. If my spouse dies, I will continue to receive both my own benefit and my deceased spouse's benefit; the total Social Security benefits I receive will not change.

This is FALSE and was answered incorrectly by one out of five respondents. If your spouse dies, you can continue to receive their retirement benefit as a survivor benefit, or your own benefit, not both. You'll get whichever is larger.

1. Social Security retirement benefits are based on my earnings history; I'll receive the same monthly benefit amount whether I start collecting before or after my full retirement age.

This is FALSE, but to be fair to the 17% of respondents who got it wrong, the first part of the statement is true. Social Security benefits are indeed based on your earnings history. However, the base benefit that is determined by your earnings history (known as your primary insurance amount, or PIA, is adjusted upward or downward depending on when you start collecting. In fact, claiming Social Security as early as possible (age 62) can result in a permanent reduction of as much as 30%.

1. If I am still working when I claim my Social Security, my benefit might be reduced, depending on my earnings and my age.

This is TRUE and was answered correctly by 85% of respondents. The Social Security earnings test says that some or all of your benefit can be withheld if your earnings exceed a certain threshold and you have not yet reached your full retirement age. After you reach your full retirement age, the earnings test no longer applies to you -- you can then collect your entire Social Security benefit regardless of how much you make.

One smart way to prepare

The Social Security Administration used to mail annual statements to all Americans, but this is no longer the case. Now, the SSA doesn't mail statements to Americans under the age of 60, so if you want to see yours, you'll need to do so online.

You can find your Social Security statement by creating an account at www.ssa.gov, although 86% of Americans ages 50-59 haven't yet.

On your statement, you'll find some valuable information that can boost your knowledge of how Social Security works and help you prepare for your retirement. For example, your Social Security statement clearly states your estimated benefit at full retirement age, as well as the effects of taking Social Security before or after that age.

The bottom line is that since so many Americans will be at least partially dependent on Social Security for financial stability in retirement, it's important to have a basic working knowledge of how the program works. Taking the time to read your Social Security statement every year is a big step in the right direction.