Majority of Americans flunk Social Security quiz

Just 28% of 1,500-plus adults received a passing grade on a series of basic questions about benefits, and that could have serious implications for their retirement income

By Mary Beth Franklin

Jun 15, 2015 @ 12:01 am EST

How much do Americans know about their Social Security benefits? Not much, it turns out. And that could have serious implications for their future retirement income.

Only 28% of more than 1,500 adults received a passing grade when asked basic questions about Social Security benefits in a true/false quiz developed by Massachusetts Mutual Life Insurance Company. And only one person who participated in the online survey conducted by KRC Research on behalf of MassMutual from Feb. 26 to March 2, answered all 10 questions correctly. (Full disclosure: I have been paid by MassMutual to speak at their events.)

"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, executive vice president of the U.S. insurance group at MassMutual. "With millions of Americans nearing retirement each year, many may be at risk of underutilizing a critical component of their retirement income stream."

The findings show gaps in knowledge about Social Security eligibility, which could negatively affect retirement planning. For example, 71% of respondents incorrectly believe that full retirement age for collecting Social Security is 65, when it actually varies by birth year. The current full retirement age of 66 applies to people born from 1943 through 1954, and it will gradually increase to 67 for those born in 1960 or later.

Another major misconception involves working while collecting Social Security benefits before full retirement age. More than half of those surveyed — 55% — incorrectly believe they can continue working while collecting full Social Security retirement benefits, regardless of their age. In reality, those who continue to work while collecting Social Security benefits forfeit $1 in benefits for every $2 they earn over $15,720 in 2015 if they are younger than full retirement age for the full year. The earnings cap reductions disappear once you reach full retirement age.

With an increasing number of foreign-born workers, it was particularly dismaying to see that three quarters of those surveyed falsely believe that being an American citizen is a requirement to receive Social Security benefits. It is not.

"When you get a 28% passing grade from more than 1,500 people about very basic Social Security questions, that indicates the size of the mountain we have to climb," David Freitag, a financial planning consultant for advance markets at MassMutual, said in a telephone interview.

"If you get your Social Security planning right, you can come up with a reasonable retirement income plan that makes sense," he said. "But if you get it wrong, every other decision could be wrong."

One of the biggest challenges is that both consumers and financial advisers underestimate the value of Social Security, which produces lifetime guaranteed income with inflation protection and survivor benefits for the remaining spouse, he noted.

For example, it would cost a 65-year-old man $500,000 to purchase a joint life immediate annuity that generates $2,100 per month in income for as long as either spouse lived, according to And that quote does not include inflation protection. Annual cost-of-living adjustments are one of the most valuable aspects of Social Security benefits.

"For most middle-income Americans, they don't have any other assets that are bigger than Social Security," Mr. Freitag said. "It is the rock upon which all other retirement income decisions are built."

(Questions about Social Security? Find the answers in my ebook.)

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