Will Social Security still be around when it’s my turn to collect benefits?

Financial institutions have been telling us for years that Social Security won’t be able to support the millions of baby boomers who will start retiring soon. Millions of Americans rely on Social Security to fund all or part of their retirement, so this is a huge concern in our country. So do we really need to worry about Social Security going under before we start collecting our retirement benefits?

The 2009 Social Security Trustees Report anticipates that Social Security benefits paid to retirees will surpass Social Security taxes paid in by workers (and earnings on the funds in the trust) beginning in 2016.  In addition, the trust fund could be drawn down by 2037.

Most likely we will see reforms such as raising the minimum or full retirement age, raising the income limit that Social Security taxes are paid on, and reduced benefits for future retirees (it’s less likely that people already receiving benefits will see their benefits reduced.

How much will my benefits be?

It’s essential to know how much income you will have from different sources, including Social Security, when you retire. For some people Social Security is their only retirement income; for others it’s a small part of their retirement, as they will have pensions and investment income in addition to Social Security. Whatever your situation is, you need to have a good understanding of how much income you will receive from all sources so you can adequately plan for your retirement years.

Your retirement benefits will vary based on a number of factors, such as the age you retire, how much you earned during your working years, and how much you contributed to Social Security (some government employees do not contribute to Social Security and therefore may not be eligible for benefits).

Basically, your top 35 years of earnings are averaged (and indexed for inflation) to calculate your retirement benefits.  The formula is more complicated than that, but that’s the basic premise. If you take your retirement benefits early, they will be reduced by up to 25%; on the flip side, if you wait until after your full retirement age to start collecting benefits, your benefits will increase by 8% for each year you wait.
The Social Security website has several calculators to help you estimate your retirement benefits.

When should I start collecting Social Security?

Probably the most commonly asked question is “when should I apply for Social Security”? By now, you’re aware that your benefits will be reduced if you apply for Social Security before your full retirement age. The question is, are you better off applying early and receiving benefits for more years, or will you benefit more if you wait until age 66 or later to apply? The answer varies for each person and is based on many factors, such as how long you plan on working, your health, if you have other sources of income, etc.

How Can I Maximize My Social Security Benefits?

Your parents probably never asked this question, but you should: “How can you maximize your Social Security retirement income?” Social Security is a much more valuable income stream than most people realize, especially because of the cost of living adjustment (COLA), so every baby boomer should ask this question. There are many rules regarding Social Security, and there’s nothing wrong with using those rules to your advantage.

Will Social Security be enough to live on?

The purpose of Social Security was never to support someone completely during retirement. It was intended to supplement other income streams (pensions and annuities) as well as your retirement savings.  So you should not expect Social Security to fund your entire retirement. On average, Social Security makes up about 40% of income received during retirement.

Recommended Resources:

Social Security Eligibility: How to Qualify For Social Security

Getting The Maximum Social Security Benefits

Social Security Questions Boomers Should Ask Before They Retire