5 things you must know about Social Security

Put to the test, many people would flunk a simple quiz on Social Security benefits. If this describes you, your ignorance could hurt you a lot because for most people, Social Security income is the bedrock of their financial security in retirement.

To probe Americans' smarts about Social Security, insurance company MassMutual recently surveyed 1,513 people online and asked them 10 basic questions about Social Security benefits. Only a little more than one in four people (28 percent) received a passing grade. Less than one in 10 (8 percent) considered themselves very knowledgeable about Social Security.

The survey shows that their perception surprisingly matches the reality. Just one of the surveyed respondents answered all 10 questions correctly.

To help you give you some essential knowledge, here's a list of five things you absolutely should know about Social Security:

1. It pays to delay the start of your benefits beyond age 62 (but not beyond age 70). For each month you delay the start of benefits beyond age 62, your benefit is increased, but there's no further increase for delaying beyond age 70. As a result, delaying the start of benefits to age 66 or even age 70, if you can, has the potential to increase your lifetime payout by thousands and thousands of dollars.

2. If you're married or have dependent children, your household can receive additional benefits. Did you know that each member of a married couple will receive a retirement income, even if one partner never worked for paid income? And dependent children or grandchildren under age 18 will receive an additional benefit, whether that child is a biological child, adopted child or stepchild.

Determining the best strategy for maximizing benefits for couples may require some time and effort, but it's worth your time because it has the potential of increasing your spouse's lifetime payout by thousand of dollars as well.

3. If you're part of a married couple and one partner dies, the survivor will only receive one Social Security income. As a result, your household income will decrease after the death of a spouse. But the survivor's benefit is the greater of the benefit the survivor was receiving before the partner died, or the partner's own Social Security benefit, so don't overlook this feature.

It's why delaying the start of benefits for the household's primary wage earner is a great way to protect a surviving widow, particularly if the husband is older and was the primary wage earner. It's also another reason why it's smart to delay starting Social Security benefits for the primary wage earner.

4. Your benefit is determined using a 35-year average of your wages. If you've earned income for less than 35 years, the Social Security benefit formula plugs in zero for those years and still averages your income over 35 years. One way to increase your Social Security income is to make sure you pay into the system for at least 35 years. If you have more than 35 years of earnings, Social Security cherry-picks the highest 35 years to give you the highest average earnings amount.

5. You can continue to work and earn a paycheck -- and also collect Social Security benefits. However, you can keep all your Social Security benefits only after you've reached your full retirement age (FRA), which is 66 for current retirees. If you're under your FRA, your Social Security benefit could be reduced by an "earnings test." For every $2 of wages or self-employment income over $15,720 per year, your Social Security income is reduced by $1.

That's yet one more reason it's a good idea to delay the start of your Social Security income at least until your FRA.

Although these five facts about Social Security are important, you should learn a lot more about your Social Security benefits. You can take the full MassMutual quiz here, and the company also provides a helpful guide to Social Security benefits. You can also learn a lot at the official Social Security website, where you can check your actual wage history and estimate your Social Security benefits based on this history.

You'll be glad you took the time now to learn as much as possible about Social Security and the benefits coming your way when you reach your 70s and 80s.