Social Security benefits application form © iStock

How and when you claim Social Security can have a huge impact on your retirement, yet most people don’t understand much about how the system works, according to a recent survey released by the Financial Planning Association and AARP.

Here are some of the biggest gaps in people’s understandings, based on the survey results:

You may not know as much as you think. Nearly half of the people ages 45 to 64 said they were somewhat or very knowledgeable about how benefits are determined, according to the research paper “Social Security Planning in 2015 & Beyond.” Financial planners, though, said only 31% of their clients were somewhat knowledgeable and a mere 1% were very knowledgeable.

A previous poll by retirement adviser Financial Engines found most people who thought they understood Social Security couldn’t answer basic questions about how it worked.

Bottom line: Before you make claiming decisions, do your research and consider getting a second opinion.

You’ll need Social Security more than you expect. About half of those polled expected Social Security to be a major portion of their retirement income. For most, though, it will become the majority, if not all, of their income as they outlive other assets. Among those age 80 or older, Social Security provides the majority of income for 76% of beneficiaries and nearly all income for 47%.

Think you won’t live that long? The average life expectancy for a man at 65 is 82.7. For a 65-year-old woman, it’s 85.2. Among married couples, there’s a 72% chance that one of them will live to age 85 and a 45% chance that one will live to age 90.

Waiting pays off. The vast majority (88%) know that delaying their application past age 62 increases their benefits, but few realize how much waiting pays off.

Only 5%, for example, knew that a benefit collected at full retirement age will be 25% to 30% higher than one collected at age 62. (Full retirement age is currently 66 but rises to 67 for people born in 1960 and later.) 42% didn’t know that delaying past full retirement age further increases their benefits (by a guaranteed 8% each year), and only one-third knew that delaying applications to age 70 will maximize their benefits.

You can collect on your spouse, or perhaps your ex. Spousal benefits can be up to half what the primary worker gets. But only about half the respondents who had ever been married knew they could receive spousal benefits based on a living spouse’s work record. Only one-quarter knew they could claim spousal benefits even if they were divorced, as long as the marriage lasted at least 10 years and they were currently unmarried. For lower earners, spousal benefits may be more than their own benefit.

At least one of you needs to wait. If you’re currently married, one of you is likely to outlive the other, perhaps by decades. That survivor has to get by on a single Social Security check instead of 2. Because the survivor’s check will be the larger of the 2 checks the married couple receive, it makes sense to ensure that benefit is as large as possible. That typically means having the higher earner postpone claiming benefits until age 70, when benefits max out.

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