Baby boomers will be retiring by the millions over the next few decades, which leaves many of them asking questions in preparation of retirement. Boomers are wondering…

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

For years the media has been telling us that the system is going “broke”. Millions of Americans are counting on these retirement benefits to help pay for living expenses during retirement, so this is obviously a great concern. Is there any truth to these rumors about our current retirement system going under?

According to the 2009 Trustees Report, Social Security retirement benefits paid out will exceed revenues starting in 2016, and the trust fund could be depleted by the year 2037. When the money in the trust fund is gone, benefits will still be paid to workers who are already collecting retirement benefits, however there will only be enough revenue (OASDI taxes paid in by people still working) to pay 76% of the benefits promised.

Most likely we will see reforms to the system such as raising the retirement age, raising the wage limit that OASDI taxes are paid on, and reduced benefits for future retirees. It’s less likely that people already collecting benefits will see their benefits lowered so baby boomers who are retiring soon probably won’t see their benefits reduced.

How much will my benefits be?

An important part of planning for retirement is knowing what resources you will have to help cover living expenses during your retirement years. Many people will rely solely on Social Security to live on during retirement; others will have pensions and/or investments to help cover living expenses. Now matter what your situation is, you need to know how much income you can expect to receive so that you can create a realistic budget for your retirement years.

The amount of your retirement benefits will depend on several factors, including when you retire, how many years you worked, how much you earned during your working years, among other factors.

The formula to calculate your retirement benefit is pretty complicated, but basically your top 35 years of earnings are averaged out and indexed for inflation to determine your retirement benefits. 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 ssa.gov website has several calculators to help you estimate your retirement benefits, or you can review the benefit estimate statement you receive each year.

When should I apply for Social Security?

Probably the most commonly asked question is “when should I sign up for retirement benefits”? You’ve already learned that collecting your retirement benefits early will mean lower benefits for life. The question is, are you better off applying early and receiving benefits for more years, or are you better off waiting until full retirement age or later to apply?

Every situation is different, so this answer will vary depending on how long you plan on working, how much you have saved for retirement, and whether you have any other income sources (such as a pension).

How can I get the most out of my retirement benefits?

Your parents probably never asked how they could maximize their retirement benefits, but you should. Social Security is a much more valuable benefit than most people realize, especially because of the cost of living adjustment (COLA), so every baby boomer should ask this question. There is nothing wrong with using the rules to your advantage.

Will my Social Security retirement benefits be enough?

For most people your retirement benefit will not be enough to cover all of their living expenses during retirement. The purpose was never to support someone completely during retirement. It was designed to supplement other income streams (pensions and annuities) as well as your retirement nest egg. On average, Social Security makes up about 40% of retirees’ income.

However, it is still a very valuable benefit – whether it makes up 40% or 90% of your retirement income – and you should do careful planning to make sure you get the maximum benefits you and your family are entitled to.