Social Security myths: Take the quiz

Older Americans are getting smarter about Social Security strategies, if the results of a Fidelity study released last week are any indication: More people now realize it pays to wait to claim benefits.

When the study was last conducted, during the 2008 financial crisis, nearly half of 61-year-olds at the edge of eligibility were eager to collect their checks as soon as they turned 62.

According to the new Fidelity Investments Social Security IQ survey, only 28 percent of those age 61 plan to claim benefits as early as possible, a significant decline from 2008, when 45 percent of those surveyed were planning to start collecting immediately.

Why are they waiting? A better economy helped. Nine years ago, more than half (53 percent) of 61-year-old respondents described themselves as unemployed. Today, the number of 61-year-olds describing themselves as unemployed dropped to 41 percent.

Twice as many pre-retirees (21 percent now, 10 percent in 2008) believed that delaying benefits offered a better return than simply claiming them as soon as possible and investing the money.

However, the survey — conducted online Oct. 18-25 among a sample of 521 respondents ages 55-61 who were not on permanent disability — showed that many still don't understand how Social Security rules have changed:

• Nearly 4 in 10 pre-retirees thought it was possible to alter their Social Security claiming strategies in retirement — but once you opt in, you can't make a change.

• The majority did not realize that the Social Security Administration needs three months' notice before issuing the first check.

• Only a quarter knew their full retirement age (FRA) — essential information to figure out how to maximize benefits.

The longer you delay claiming Social Security, the bigger your benefits could be, explained Ken Hevert, senior vice president of retirement at Fidelity Investments.

"We were encouraged that more people seem to be making this decision more thoughtfully than in years past," he said.

Though 62 is the earliest age some can claim benefits, it doesn't necessarily mean that's when you should start. Benefits are based on the full retirement age, which is determined by the Social Security Administration and calculated assuming you will claim at FRA, according to the year you were born.

For those born in 1960 or later, the full retirement age is 67. For those born before 1960, the full retirement age is 66. Waiting until full retirement age means your monthly Social Security income could increase by as much as 30 percent. (To determine your full retirement age, visit www.ssa.gov.)

For now, take our true-or-false quiz to find out what you know or don't know:

Social Security benefits are based on your last year of income. False: Your benefit is calculated based on your highest 35 years of earnings, and do not have to be consecutive years or before age 65. If you work past 65, those earnings years will be included, as long as they are high enough to be part of your highest 35 years. Even working part time after turning 65 may be part of your highest 35 years of earnings. If you don't have 35 years with earnings, zeros will be included in the calculation.

You can apply for Social Security and get benefits right away. False: Sixty percent of those surveyed by Fidelity did not know you need to apply three months before the first payment — including the 9 percent who incorrectly believed the Social Security Administration would contact them when it was time to receive benefits. Give yourself at least three months to apply.

You can "do-over" by filing for Social Security, then suspending benefits. False: There are no do-overs. Thirty-eight percent of pre-retirees thought it was possible to change their Social Security claiming strategy throughout retirement — in other words, to claim early at 62 and then, when they reach 66 or older, have their payments increased to the amount corresponding to their full retirement age benefits. In fact, there is no income "bumping" once you have claimed your Social Security retirement benefits — and the decision cannot be altered.

The whole idea of retirement is starting to change as Americans live longer and face more years in it. Most interesting, Hevert said, is that "we've even seen people not seeking a finish line. They want to continue to work."

Other studies back this up, including "10 Years After the Crisis: Middle-Income Boomers Rebounding But Not Recovered," which found that such boomers — those with an annual household income between $30,000 and $100,000 and less than $1 million in investable assets — are reconsidering exiting the workforce.

According to the Center for a Secure Retirement study, before the financial crisis, 35 percent of middle-income boomers expected to work full time or part time in retirement. Today, 48 percent expect to work full or part time.