My Comments: Many are railing against capitalism these days and others against socialism. If you’re adamantly opposed to socialism, I trust you’ve refused to cash your social security checks. Yes, you paid into the system, but the bulk of the money you get comes not from what you put in, but from what our children have put in.

While I believe strongly in capitalism, I thoroughly appreciate the monthly check my wife and I receive from the Social Security Administration. Yes, it shifts some of the financial burden to future generations, but it today represents a social contract we have with the United States. I’ll work hard to help clients and others understand how it exists to help them survive if the need is there.

By Jamie Hopkins – 6/17/2015

Most Americans do not properly understand their Social Security options and it’s not a surprise to the financial services industry. A new survey of roughly 1,500 Americans was conducted by KRC Research on behalf MassMutual and found that 72% of respondents could not pass a true or false ten question quiz on Social Security.

In fact, the lack of knowledge about Social Security is consistent with a comprehensive retirement income literacy test, the RICP® Retirement Income Survey, which was conducted by The American College and found that only 20% of Americans could pass the test but that a slightly higher amount understood Social Security.

Perhaps more troubling was that 62% of the survey respondents over age 50 failed the test. This is a group of people that will rely heavily upon Social Security in retirement, as nearly 1/3rd of current retirees rely almost solely upon Social Security for their retirement income. This highlights an important finding in the MassMutual survey as only 15% of respondents expect to rely solely upon Social Security, which indicates that many people misunderstand how important Social Security is to their retirement income. This age-group should be focusing on retirement planning.

However, many are ill-informed about their main retirement asset, Social Security. This lack of knowledge creates an environment for making uniformed decisions that could detrimentally impact one’s retirement. “Americans who lack the proper knowledge and information about Social Security may be putting their retirement planning in jeopardy,” said Phil Michalowski, Vice President, U.S. Insurance Group, MassMutual. “In fact, many may be leaving Social Security retirement benefits they’re entitled to on the table, or incorrectly assuming what benefits may be available in retirement.”

The full MassMutual Social Security survey is available to take here, now let’s take a look at a few of the most important questions that were misunderstood by the respondents.

1. Social Security Full Retirement Age:

“Under current Social Security Law, full retirement age is 65.” This statement is false. According to the survey, nearly 71 percent of respondents answered this question incorrectly. This can be confusing for many people as full retirement age under Social Security was 65 in the past and many of our parents might have retired when the full retirement age was 65. Additionally, Medicare eligibility starts at age 65, which creates an anchor point in many people’s minds that full retirement for Social Security benefits is also age 65. However, full-retirement for Social Security benefits varies based on the year in which you were born. For those individuals born from in 1943 until 1954, their full retirement age will be 66. For those born in 1960 or later, the full retirement age for Social Security benefits is age 67. It is important to understand your full retirement age for Social Security benefits because if you claim benefits before full retirement age the amount of money you receive could be permanently reduced.

2. The Earnings Test:

“I can continue working while collecting my full Social Security retirement benefits – regardless of my age.” This statement is False. Nearly 56 percent of respondents did not answer this question correctly. Again, it is important to understand your full-retirement age. If you have claimed Social Security benefits prior to full retirement age and are still working and you earn too much then your Social Security benefits will be currently reduced under the earnings test. This does not penalize the worker as much as many think as benefits lost under the test are essentially restored by a recalculation of benefits at full retirement age. Also, once you reach your full retirement age, the earnings test no longer applies, and you can both have earnings from employment and receive Social Security benefits.

3. Spousal Benefits:

“My spouse can qualify for Social Security retirement benefits, even if he or she has no individual earnings history.” This statement is True. Social Security provides spousal retirement benefits for spouses of workers eligible for Social Security retirement benefits. The amount that the non-working spouse is eligible for under Social Security is based on the working spouse’s full retirement benefit, and the age of the spouse. To receive the maximum benefit, the spouse has to attain full retirement age before claiming. Benefits are reduced if benefits are claimed between age 62 and full retirement age.

The Federal Government has put resources and significant efforts into helping people better understand their benefits and the United States Social Security Administration has great resources online to help better understand your benefits and claiming options. However, Americans still need a lot of help making important retirement decisions. According to Michalowski, one of the goals of the MassMutual survey was to bring increased awareness and education to people around the importance of Social Security benefits. In fact, MassMutual has developed online material to help consumers with understanding some basics of Social Security. Ultimately, Michalowski believes that financial professionals need to play a serious role in helping Americans better understand Social Security by working with clients and making sure they have the knowledge to make informed decisions regarding their retirement. This also means you need to ask your financial adviser questions about Social Security, find out about your benefits, and don’t leave anything on the table because you didn’t ask the right question or didn’t understand your benefits.