Most of us know the basics of Social Security.
The government takes money out of each paycheck and then we receive a monthly retirement check for life, starting as early as 62.
But Social Security is much more than that.
The program will provide financial support to your spouse and young children if you die early. It is disability insurance if you are seriously injured. And Social Security provides a substantial amount of retirement income for the poor and prosperous, and is likely the only retirement benefit you will get that is annually adjusted for inflation.
"Social Security is so much more valuable than we ever give it credit for," says Mary Jane Yarrington, who answers questions on Social Security in a column for the National Committee to Preserve Social Security and Medicare.
It is also far more complicated than you might imagine. The oldest baby boomers who are turning 62 this year are finding that out now. Here are a few things you might not know:
Kids can get it, too. Many people start families late in life, and young children of a retired parent collecting Social Security are eligible for benefits, too. Kids can receive benefits up to age 18, or 19 if still in high school.
The size of kids' benefits depends on the number of children in the family. For a family with one child, though, the benefit is generally half of what the parent receives.
Also, if you adopt a grandchild, the youngster could be eligible for benefits based on your record, Yarrington says.
"There are very strict rules," she warns. "The parent has to be out of the picture."
Benefits for parents. Parents receiving half their financial support from an adult child can be eligible for survivor benefits if that child dies, says Lita Epstein, author of The Complete Idiot's Guide to Social Security and Medicare.
This is rare, she adds.
To qualify, the parent must be at least 62, she says. Also, if a parent already receives Social Security, she won't get two checks. She will receive the larger benefit.
Earliest benefits. Sixty-two isn't the earliest age for benefits. Widows and widowers can receive reduced benefits starting at 60, or 50 in the case of disability.
Benefits calculation You need 40 quarters - or 10 years - of paying into the system to receive retirement benefits. But benefits are calculated using your highest 35 years of earnings.
That means if you only have 10 years of earnings, the calculation will factor in 25 years of zero income, says Bruce Schobel, a New York actuary.
Eight-percent solution Many workers underestimate the value of waiting to take benefits. For every year you postpone your benefits beyond your full retirement age, your monthly benefits rise 8 percent until 70. (It's 7.5 percent for those born before 1943, Schobel says).
If you're short on savings and long on life expectancy, postponing benefits could be the answer.
Spousal benefits Married couples can maximize lifetime benefits by timing when they take them.
But here's a twist that even Yarrington, who has been writing on Social Security for 21 years, says she never heard of until she read it last year in The Wall Street Journal.
The strategy uses an option where one spouse can receive benefits on the other's record. Traditionally this has been used by a wife who hasn't worked or has only a small benefit from her work record. But it can also be used by a spouse to collect benefits under a mate's record while letting his own benefit continue to grow.
Consider: A wife starts taking reduced benefits, say, at 62 based on her work record. Her husband waits until his full retirement age of 66 before applying for spousal benefits based on his wife's earnings. The spousal benefit in this case will be half of what his wife would have received had she waited to take Social Security at her normal retirement age. (For this to work, the husband must wait until his full retirement age to apply for the spousal benefit, Yarrington says.)
The husband's benefit on his own work record continues to accrue. At 70, he applies for his benefit. The smaller spousal benefit is discontinued. But the husband's benefit is now 32 percent higher - 8 percent each year - than if he had taken it at 66.
Apply to play. You must apply for benefits to receive them. Not everyone does.
President Ronald Reagan, for instance, turned 70 not long after his inauguration in 1981, says Schobel, who was an actuary with Social Security at the time. Reporters would call the agency to find out if Mr. Anti-Big Government had applied for benefits. With the White House's permission, Social Security disclosed that the president had not applied, Schobel says.
Reapply for benefits. If you regret taking early benefits and locking in lower payments for life, a do-over is possible. You can withdraw your early application for benefits and reapply. The catch: You must repay all benefits you received but without interest.
Laurence J. Kotlikoff, a Boston University finance professor, has crunched some numbers:
Take a 70-year-old who took early benefits and now receives $11,556 a year from Social Security. If she had waited until 70, her annual benefit would be $20,000, or nearly 75 percent higher. By repaying the $79,305 she received in benefits, she is essentially buying an annual inflation-index annuity of $8,444, Kotlikoff says. That's cheaper than buying a similar annuity from an insurer, he says.
Kotlikoff predicts more retirees will repay benefits once they do the math. Others are doubtful. "Most people can't afford to pay it back," Epstein says.
Got questions on Social Security? The agency has loads of information on its Web site: www.ssa.gov. Yarrington also welcomes questions for her column at www.ncpssm.org. Or, write to her at the National Committee to Preserve Social Security and Medicare, 10 G Street N.E., Suite 600, Washington 20002.
Questions? Comments? Or to share a tip with readers, contact Eileen Ambrose at 410-332-6984 or by e-mail at eileen.ambrose @baltsun.com