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Social Security

3 Social Security Facts That Are Key to Bigger Benefits

Not understanding this retirement program could cost you real money in the future.

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What you don't know can't hurt you, right? Well, actually, it can hurt you a lot if what you don't know are the basics about a program that's as important to your financial security as Social Security. And according to the results of a new quiz, a lot of Americans may be in for a lot of hurt.

See Also: SLIDE SHOW: 10 Things You Must Know About Social Security

The quiz, commissioned by Massachusetts Mutual Life Insurance, asked 1,500 Americans 10 true/false questions about the program that this year is paying out retirement benefits totaling almost $55 billion each month to more than 42 million Americans. The results were not encouraging.

More than 70% of those questioned flunked the test; only 28% scored 60% or higher. Only one person knew the correct answer to all 10 questions.

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Think these were trick questions?

Think again.

It has been more than 30 years since Congress decided to abandon 65 as the official retirement age for Social Security. Full retirement age is now 66, and it will gradually rise to 67 for workers born in 1960 or later. Still, 71% of those questioned by MassMutual thought full retirement age was still 65.

Only 57% of those questioned knew that your age when you claim benefits affects the size of those benefits. The other 43% believed they would get the same benefit no matter when they began drawing benefits.

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Such misunderstandings could have dire financial consequences. Your age when you claim benefits actually has an enormous impact. At full retirement age (now 66, not 65), you'll get 100% of your full benefit. If you claim retirement benefits at the earliest age possible (62), you'll get just 75% of that full benefit. But if you wait until age 70, you'll get 132% of the age 66 amount. If you deserve $2,000 a month at age 66, you'll get $1,500 if you start taking benefits at 62 . . . and $2,640 if you wait until age 70 to start. (Read more about Best Strategies to Boost Your Social Security Benefits.)

Another mistaken belief: 55% of those questioned thought they could continue to work after they claimed benefits with no impact on those benefits, regardless of their age. In fact, in the years before you reach full retirement age, you'll lose $1 of benefits for every $2 you earn over a certain threshold ($15,720 in 2015) -- although your benefit will be adjusted upward to account for the missing benefits once you hit full retirement age. (Read more about the earnings test.)

"Perhaps the greatest Social Security deficit in this country is the lack of education around the retirement benefits of the program," said Michael R. Fanning, a MassMutual executive. "With millions of Americans nearing retirement each year, many may be at risk of underutilizing a critical component of their retirement income stream."

Searching for a silver lining? Folks age 40 and older were much more knowledgeable about Social Security than those ages 19 through 39. Among the older group, 21% got at least three-fourths of the answers right. It was just 8% for the younger respondents.

You can download the quiz here, and you might learn something from reading the correct answers at its conclusion.