Social Security has been around for nearly 90 years, and almost 68 million Americans receive some type of benefit from the popular federal program each month. However, there's still a lot about Social Security that many people don't know.
MassMutual recently commissioned an online poll of Americans between the ages of 55 and 65 to find out how well they understood Social Security retirement benefits, and the results weren't great. Forty-one percent of respondents flunked the test.
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Questions at least 75% of people answered correctly
Only around 3% of Americans surveyed scored a grade of A on MassMutual's Social Security test. Another 7% received a B, while 13% made a C. Thirty-seven percent were on the brink of failing with a grade of D. Despite these dismal scores, there were several questions that at least 75% of people answered correctly.
For example, 92% of respondents answered "true" when asked whether or not their retirement benefits would be reduced in most cases if they filed for Social Security before their full retirement age (FRA). Retirement benefits are indeed reduced by five-ninths of 1% for each month before your FRA up to 36 months. Before then, retirement benefits are reduced by five-twelfths of 1%.
Most people (84%) also knew that their Social Security retirement benefits could be reduced if they claimed the benefits before their FRA, continued to work, and made above a specified amount. They weren't asked, however, if they thought they'd receive the withheld money once they reached their FRA. (They would.)
Three-quarters of the online poll participants understood that their spouses can receive Social Security retirement benefits based on their earnings history when the spouse doesn't have an individual earnings history. Spousal benefits can total up to 50% of the higher-earning spouse's benefits at their FRA.
How would you do on the toughest questions?
However, there were several questions on MassMutual's online poll that fewer than 60% of respondents answered correctly. Let's see how you do on these toughest questions.
If you divorce, you can collect Social Security retirement benefits based on your ex-spouse's earnings history.
The correct answer to this question is "true." There are some restrictions, though.
For example, your marriage must have lasted for at least 10 years, and you must be unmarried and at least age 62. Your individual Social Security retirement benefit must also be less than the amount you're entitled to receive based on your ex-spouse's earnings history.
All Social Security benefits could be reduced by 20% or more by 2035 unless changes are made.
This statement is true. Unfortunately, the date could be even sooner because the Social Security trust funds will run out of money by 2034, according to the Congressional Budget Office (CBO).
The reductions could be greater, too. The CBO projects that Social Security benefits would have to be cut by 25% if reforms aren't made to bolster the program's finances.
Your full retirement age (FRA) is 65 no matter when you were born.
The correct answer to this question is "false." FRA varies based on birth year. The lowest FRA for anyone born in 1943 or later is 66, increasing by two months each year beginning in 1955. FRA is 67 for anyone born in 1960 or later.
If you file for Social Security retirement benefits and have dependent children age 18 or younger, your kids may also qualify for Social Security benefits.
This statement is true. The dependent must usually be a biological or adopted child, although in some cases, dependent stepchildren and grandchildren can be eligible for benefits. Also, the child generally must be unmarried.
If you wait past age 70 to begin receiving Social Security retirement benefits, you'll continue to get delayed retirement credit increases.
The correct response to this question is "false." Delayed retirement credits are only available through age 70.
Your Social Security retirement benefits are subject to income taxes in the same way that withdrawals from a traditional IRA account are.
This statement is false. Social Security benefits are taxed at the federal level only when your combined income (your adjusted gross income plus nontaxable interest plus one-half of your Social Security benefit) is higher than specified thresholds. Around 40% of individuals who receive Social Security benefits have to pay federal income taxes on their benefits.
You must be a citizen of the United States to receive Social Security retirement benefits.
The right answer to this one is "false." Anyone who is legally in the U.S. and meets all eligibility requirements can receive Social Security retirement benefits.
Two other questions you'll want to think about
MassMutual also asked other questions that weren't strictly related to Social Security. You'll want to think seriously about two of them.
The online survey asked whether or not individuals' retirement planning "account[s] for inflation and market volatility." Only 20% answered "yes," with another 34% responding "I hope so."
Participants were also asked how many years they thought their income would sustain them in retirement. Thirty-six percent answered 10 years or less. Another 27% responded that their income would only sustain them for 11 to 20 years in retirement.
It's important to have good answers for both questions, regardless of how you scored on the Social Security questions.
