You’re probably covered under Social Security–according to the Social Security Administration, an estimated 165 million workers are*–but how much do you know about this program? Test your knowledge by answering the following questions.
1. If you decide to collect your retirement benefit starting at age 62, your benefit will be how much less than if you wait until your full retirement age?
a. 5% to 10% less
b. 15% to 20% less
c. 25% to 30% less
d. 35% to 40% less
2. Your spouse and children may be eligible for benefits if something happens to you.
3. The Social Security taxes that are collected from your paycheck are called:
a. FUTA taxes
b. FETA taxes
c. FICA taxes
4. Once you reach full retirement age, you can work and earn as much as you want without reducing your Social Security benefit.
5. Once you begin receiving your retirement benefit, it will never increase.
1. c. If you were born in 1943 or later, you’ll see a 25% to 30% reduction in your retirement benefit if you claim Social Security benefits at age 62, rather than waiting until your full retirement age (which is 66 to 67, depending on your year of birth). This reduction is permanent.
2. a. Social Security isn’t just for retirees. Your spouse and dependent children may be able to receive survivors or disability benefits based on your earnings record if certain eligibility requirements are met.
3. c. Social Security payroll taxes are called FICA taxes because they are collected under the authority of the Federal Insurance Contributions Act. FICA includes two separate taxes: Social Security and Medicare. The Social Security portion is withheld from your pay at a rate of 6.2% (matched by your employer), but only on earnings up to the maximum earnings limit for the year ($117,000 in 2014).
4. a. Before you reach full retirement age, your benefit will be reduced if your earnings exceed certain limits, but these earnings limits no longer apply once you reach full retirement age.
5. b. There are several reasons why your benefit might increase after you begin receiving it. First, you’ll generally receive annual cost-of-living adjustments (COLA). Second, the Social Security Administration recalculates your benefit every year to account for new earnings, so your benefit might increase as a result. Your benefit might also be adjusted if you qualify for a higher benefit based on your spouse’s earnings once he or she files for Social Security.
For more information, visit the Social Security Administration’s website, www.ssa.gov.
*Social Security Basic Facts, 2014