What Do You Know About Social Security? Take a Quiz

For most of those nearing retirement, Social Security is expected to be the main source of income. Nearly nine out of ten people aged 65 and older were receiving a Social Security benefit as of December 31, 2022, and Social Security benefits represent about 30% of the income of the elderly, according to the Social Security Administration. Social Security remains the most common source of retirement income according to the Federal Reserve.

Social Security is financed through a dedicated payroll tax. Employers and employees each pay 6.2% of wages up to the taxable maximum of $160,200 (in 2023), while the self-employed pay 12.4%.

Yet, according to researchers at the Massachusetts Mutual Life Insurance Company, many seem unaware of the basic workings of the program.

“There are two key things to remember when it comes to retirement: Knowledge is power and planning is powerful,” MassMutual’s head of product, Paul LaPiana, said in a statement. “For those nearing retirement, the questions you need to ask yourself are, ‘Where is my income going to come from, and what do I need to do to ensure that I do not leave anything on the table?”

The Survey Said…

From March 31 to April 5, 2023, the New York market research firm PSB Insights conducted an online survey on behalf of MassMutual among 1,500 Americans ages 55 to 65 who have not filed for Social Security retirement benefits.

According to a CNBC report, about 43% of the 1,500 people surveyed were unsure how much of their income will come from Social Security benefits. About half of respondents did not know how long to wait to claim the maximum financial benefit. A further 28% did not know how much money in addition to Social Security they would need to live comfortably in retirement.

Only 28% said their retirement income plan considers inflation and market volatility, while 26% said their plan does not do so. Another 25% were unsure whether their plan considers inflation and market volatility, and 21% did not know enough about their plan to comment one way or the other. Regarding the question of how exposed they are to stock market fluctuations in retirement, 16% also said they did not know.

An encouraging 24% of respondents reported that they had documented all their financial information and online usernames and passwords in one place as part of their estate plans, and 54% said they planned to do so. But 22% had not done this and did not plan to do so.

True or False?

In addition to the survey, MassMutual had respondents take a true/false quiz. The result: more than one-third (35%) of respondents failed, while 34% just managed an overall passing grade of D. The highest grade on any one question was a B (84%).

When CNBC posted a version of the quiz, for example, 40% wrongly believed that “the money that comes out of my paycheck for Social Security goes into a specific account for me and remains there, earning interest, until I begin to receive Social Security benefits.” Actually, Social Security payroll taxes are collected by the Internal Revenue Service and are formally entrusted to the two Social Security trust funds, the Federal Old-Age and Survivors Insurance Trust Fund and the Federal Disability Insurance Trust Fund.

So, how do you think you would do on a Social Security quiz?

Here’s our 10-question quiz, based on those posted by CNBC and MassMutual. Decide whether the statements below are true or false. Compare your answers to see how your answer stacks up with those surveyed. (The answers follow, with explanations from a MassMutual handout, plus links to the Social Security Administration website.)

The percentages of correct answers are from CNBC. What percentage did you get right?

The Quiz

True or False:

1. In most cases, if I take benefits before my full retirement age, they will be reduced for early filing.
2. If I am receiving benefits before my full retirement age and continue to work, my benefits might be reduced based on how much I make.
3. If I have a spouse, he or she can receive benefits from my record even if he or she has no individual earnings history.
4. If I have a spouse and he or she passes away, I will receive both my full benefit and my deceased spouse’s full benefit.
5. If I file for retirement benefits and have dependent children aged 18 or younger, they also may qualify for Social Security benefits.
6. If I get divorced, I might be able to collect Social Security benefits based on my ex-spouse’s Social Security earnings history.
7. Under current Social Security law, full retirement age is 65 no matter when you were born.
8. If I delay taking Social Security benefits past the age of 70, I will continue to get delayed retirement credit increases each year I wait.
9. Social Security retirement benefits are subject to income tax just like withdrawals from a traditional IRA account.
10. I must be a U.S. citizen to collect Social Security retirement benefits.

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The Answers

1. True. (84% answered correctly.) If you collect Social Security retirement benefits before reaching full retirement age, you effectively lock in a lower monthly benefit amount. If you wait until after you reach full retirement age, you become eligible for delayed retirement credits. These credits increase your monthly benefit amount by 8% each year that you delay collecting, up to a maximum of 32%. https://www.ssa.gov/benefits/retirement/planner/agereduction.html)
2. True. (77% answered correctly.) You can work and receive Social Security retirement benefits at the same time. However, if you have not reached your full retirement age, your earnings will be subject to the retirement earnings test. If your income exceeds the test limit, Social Security may withhold all or a portion of your benefits. Withheld benefits are repaid over your lifetime once you reach full retirement age. (https://www.ssa.gov/benefits/retirement/planner/whileworking.html)
3. True. (72% answered correctly.) Many spouses choose to stay at home to raise children or otherwise spend extended periods of time outside the paid workforce. This decision can affect a spouse’s ability to qualify for Social Security benefits. In such cases, the spouse who earns less may be eligible for a Social Security spousal benefit. A spousal benefit can be as much as 50% of the higher earning spouse’s full retirement age benefit. The exact percentage will depend on whether or not each spouse has reached his or her full retirement age. (https://www.ssa.gov/benefits/retirement/planner/applying7.html)
4.  False. (65% answered correctly.) Social Security retirement benefits are only paid while you are alive. Assuming that you qualify, you would receive the greater of your benefit or your spouse’s benefit, but not both. (https://blog.ssa.gov/understanding-spouses-benefits/)
5. True. (56% answered correctly.) When you file for Social Security retirement benefits, your children may also qualify to receive benefits based on your record. An eligible child can be your biological child, adopted child, or stepchild. A dependent grandchild may also qualify. Normally, benefits stop when children reach age 18 unless they are disabled. However, if the child is still a full-time student at a secondary school at age 18, benefits will continue until the child graduates or until two months after the child reaches age 19, whichever comes first. (https://blog.ssa.gov/social-security-survivors-benefits-explained/)
6. True. (56% answered correctly.) You may be eligible to receive retirement benefits based on your ex-spouse’s earnings record, provided that: your marriage lasted at least 10 years; you are currently unmarried; you are at least 62 years old; and the benefit you would receive based on your personal earnings history is less than the benefit amount you would receive if you filed for benefits based on your ex-spouse’s earnings record. If your ex-spouse has not yet applied for retirement benefits, but qualifies for them, you can collect benefits based on your ex-spouse’s record, provided that you have been divorced for at least two years. (https://blog.ssa.gov/ex-spouse-benefits-and-you/)
7. False. (53% answered correctly.) Your full retirement age is based on the year you were born. For people born between 1934 and 1954, the full retirement age is 66. If you were born in 1960 or later, the full retirement age is 67. For anyone born between 1955 and 1959, the full retirement age increases gradually. (https://www.ssa.gov/benefits/retirement/planner/agereduction.html)
8. False. (49% answered correctly.) Once you reach age 70, no additional delayed retirement credits accrue. (Social Security Administration, Retirement Planner. https://www.ssa.gov/benefits/retirement/planner/agereduction.html)
9. False. (38% answered correctly.) While both Social Security and IRA income may be taxed, special rules limit taxes on Social Security income to only up to 85% of benefits. This usually happens only if you have other substantial income in addition to your benefits (such as wages, self-employment, interest, dividends, and other taxable income that must be reported on your tax return). You will pay tax on only 85% of your Social Security benefits, based on Internal Revenue Service (IRS) rules. If you file a federal tax return as an “individual” and your combined income is between $25,000 and $34,000, you may have to pay income tax on up to 50% of your benefits. If your combined income is more than $34,000, up to 85% of your benefits may be taxable.If you file a joint return, and you and your spouse have a combined income that is between $32,000 and $44,000, you may have to pay income tax on up to 50% of your benefits. If your combined income is more than $44,000, up to 85% of your benefits may be taxable.If you are married and file a separate tax return, you probably will pay taxes on your benefits. (https://www.ssa.gov/benefits/retirement/planner/taxes.html)
10. False. (29% answered correctly.) You do not have to be a U.S. citizen to qualify for Social Security retirement benefits. Resident aliens who pay into the Social Security system may qualify to receive retirement benefits, assuming they earn enough credits and meet additional criteria. To become part of the Social Security system, non-U.S. citizens must have lawful alien status, permission by the U.S. Citizenship and Immigration Services (USCIS) to work in the U.S., and a Social Security number. (http://www.ssa.gov/OP_Home/handbook/handbook.17/handbook-1725.html)

Conclusion: Find Out More

Whether you have one or many streams of income in retirement, you should study the subtleties of the investments, programs, and tax laws and plan carefully. See our Bowen Report “How Your 401(k) Works When You Retire.”  For more advice, see a wealth adviser for help.

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