A key part of your retirement planning should be an understanding of your Social Security benefits. This monthly check is a safety net, and the timing of when you start taking benefits can be a game changer.

“If you have average earnings, your Social Security retirement benefits will replace only about 40 percent,” the Social Security Administration says. “The percentage is lower for people in the upper income brackets and higher for people with low incomes.”

So how much do you know about the benefit that, for many of you, will make up so much of your retirement income?

I don’t ask that to make you feel stupid. The Social Security system is complicated. There are many variables to consider as you decide when to claim your benefits.

But the more you know, the more likely you’ll make a better decision about the right time to begin collecting your benefits.

Let’s start with how your benefits are calculated.

Mark Miller, writing for Morningstar, had an interesting post recently on the debate about the break-even point for Social Security.

“Many Social Security claimants who consider delaying want to analyze what they regard to be a key number: their break-even age, or the age when total lifetime benefits received would be equal to using a different claiming age,” Miller wrote. “Taking benefits early works out to your advantage if you don’t live to the break-even age. You also come out ahead if you delay benefits and then live beyond the break-even point. The losing scenario is delaying benefits and dying before reaching the break-even age.”

Miller provides a super easy explanation of how your Social Security benefits are calculated.

“To determine your benefit amount, the SSA takes into account your 35 years of highest wages and translates this into something called the primary insurance amount,” he explains. “If you wait until the full retirement age of 66, you would receive 100 percent of the primary insurance amount. If you start at 62 (the earliest opportunity), you will receive a reduced benefit for the rest of your life — 25 percent lower. By waiting until after full retirement age (66), you would get the delayed retirement credit, which is 8 percent for each 12-month period that you delay. The credits are available until age 70.”

Read this for more on the match behind the break-even point: “When Are You ‘Money Ahead’ on Social Security?

After reading Miller’s post, I began to wonder how much I know. So I took a few quizzes to test my knowledge. I suggest you do the same.

Financial Engines has a quick, eight-question Social Security quiz that will test some basic stuff. Here’s a sample.

True or False: You’ll receive the same monthly Social Security benefit no matter how old you are when you start collecting.

How would you answer this one?

What is the minimum number of years that you should work to be eligible for Social Security benefits? Your choices are:

  • There is no minimum
  • 5 years
  • 10 years
  • 35 years

Take the test to see how you’ll do and get the answers to these two questions.

Once I finished the Financial Engines’ quiz, I hopped over to AARP’s Social Security True or False Quiz. Here are two questions from that test.

True or False: A couple must be married for at least 10 years before a person can collect spousal benefits on their partner’s record.

True or False: Foreign citizens cannot collect Social Security benefits.

Whether you are right or wrong on this last question, read: “Social Security: 5 Surprising Facts About Noncitizens and Benefits

I scored well on both quizzes, but each question and answer sent me looking for more information, which is what I hope you will do, as well.

Your thoughts
What did you learn from taking the quizzes? Is there something about Social Security you wish you had known before collecting your benefit? Send your comments to colorofmoney@washpost.com. Please include your name, city and state.

Retirement rants and raves
I’m interested in your experiences or concerns about retirement or aging. What do you like about retirement? What came as a surprise?

If you haven’t retired, what concerns you financially? You can rant or rave. This space is yours. It’s a chance for you to express what’s on your mind. Send your comments to colorofmoney@washpost.com. Please include your name, city and state. In the subject line, put “Retirement Rants and Raves.”

Violeta K. of Washington state wondered what to do with the required minimum distributions she has to take from her Individual Retirement Account.

“I have been taking RMD’s for about 5 years,” she wrote. “Unfortunately, not only am I paying taxes on them, but I am also spending the money. If I can reduce my expenditures even a little, what do you recommend I do with the money?”

Here’s some good advice: “3 Money-Smart Ways to Use Your RMDs

In last week’s retirement newsletter, “How to live it up without going broke before you die,” I wanted to know: Are you retired and suffering from “spendaphobia,” the fear of spending the money you’ve saved for retirement.

“For the three years preceding my early retirement, I would ask my accountant if I had enough to retire,” wrote Barbara Thompson from New York City. “Every year, the same answer, ‘Yes.’ Finally, I told him I was going to retire. Then he asked me a simple question: ‘You have been really good at saving. Are you going to be able to spend money now and actually take money out of retirement/savings accounts? If the answer is yes, retire. If the answer is no, keep working.’ I knew I could spend the money wisely, so I retired. That was 10 years ago, and it has been a delightful retirement!”

Martin Berger of Ossining, N.Y., wrote, “It is a big change of mental gears to go from a saving mentality to a spending mentality. We are actually spending more now than when we worked, because we have a winter home and because we share our investment bounty with our children via an annual gift and contributions to grandchildrens’ college savings plans. It’s definitely all right to spend your money — provided you have money! I would wish that everyone were able to save as we did and enjoy the liberation of finding that you have enough money for retirement years. Early on, I told our kids to start saving for retirement right from the start. Too many folks aren’t able to and don’t begin to take it seriously until they are too close to retirement to make a major change. You don’t have to become a spendthrift in retirement — we still shop carefully and buy things on sale. But it’s wonderful to be able to treat yourselves well.”

Lynn Sherman from West Hartford, Conn., wrote, “I am a saver by nature so I make sure to have line items in my budget for entertainment, travel and personal care. If I notice myself “underspending” in these categories, I plan something nice for myself.”

Jennifer from Alabama wondered about the advice for younger retirees. She wrote, “Retiring in our 50s, I am VERY leery of running past our savings, and unclear if I can really trust advice for 65- and 75-year-olds. Both afraid of ramping up our lifestyle irreversibly (until we go broke that is) and new costs not even imaginable to us today (Who knew in the 70s I should save money for tooth implants instead of dentures, or fertility treatments for our kids instead of college for our grandkids?).”

Loved this article by Donna Rosato: “The New Rules for Early Retirement

Gerry Vinson of Elizabeth, Colo., wrote, “I spend reasonably in retirement, but am not afraid to spend. I restrict a major spending event to one time a year. That gives my savings time to recover a bit. I retired in 1998 at 56. Fortunately, I have a company retirement check that is small because of early retirement, along with Social Security. I limit my IRA drawdown to a level that will carry me into my late 90s. If needed I can do a reverse mortgage. I made sure that I have had no debt since 1998 other than paying off a Visa bill each month, never charging more than I can handle. Being debt free is a HUGE stress reliever. I’ve also made a decision that if living cost increases beyond my planning, I will cut back rather than go back to work. Vacations are enjoyed but limited to once a year with careful and reasonable cost planning. Happiness is fleeting, but contentment is the real value and I believe has more effect on one’s well-being and long-term health.”

Pat from Rockville, Md., wrote, “Your column about spending in retirement came at just the right time for us. My husband retired at age 70 from a fairly high-paying career at the end of 2017. Although I am 67, I am still working as a freelancer but typically make no more than $20,000 to $25,000 a year. I plan to continue working as long as I can, so we have that extra income, though my husband thinks it is unnecessary and would like me to stop working or cut back so we have more time to spend together. We have always been careful with money. We pay cash for cars (which we keep for 10 years or more), and we paid off our mortgage a few years ago. However, we have never kept a budget and never felt the need to do so, since our income (mainly his income) was sufficient to pay the bills, provide discretionary income and save a lot (including making full contributions to IRAs). The good news is that it looks like we have enough to live comfortably in retirement. The bad news is that I am afraid of running out of money if we have unexpected medical or other expenses and/or if the stock market plunges, or if I live too long (90s and even 100+ are not unusual for my father’s family). We want to travel while we are still in good enough health to be able to do so, but I can’t help worrying when I see that each major trip costs between $5,000 and $10,000. (Our daughter and her family live overseas.) Yet I don’t worry about the money we spend regularly on eating out or my little treats like ice cream and bubble tea — even though these expenses can add up to a few hundred dollars each month. My husband, on the other hand, feels that we should cut back on the regular restaurant and treat expenses, but he doesn’t worry about the big trip expenses (or feels that they are important enough that they are justified). I guess it’s good for me to continue to worry about running out of money if it keeps me from making some unnecessary big expenditures, but it would be nice to enjoy retirement and the fruits of our decades of work and savings. I hope to find a financial and psychological balance soon.”

If you’ve found balance, share your tips on how you spend without fear yet still watch that you don’t go overboard. Send your comments to colorofmoney@washpost.com.

For those fighting the fear of retiring or running out of money read: “Your fear of retirement could be ruining it

Newsletter comments policy
Please note it is my personal policy to identify readers who respond to questions I ask in my newsletters. I find it encourages thoughtful and civil conversation. I want my newsletters to be a safe place to express your opinion. On sensitive matters or upon request, I’m happy to include just your first name and/or last initial. But I prefer not to post anonymous comments (I do make exceptions when I’m asking questions that might reveal sensitive information or cause conflict.)

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