A National Challenge     "This year, the first of about 78 million baby boomers turn 60, including two of my Dad's favorite people — me and President Clinton. This milestone is more than a personal crisis — it is a national challenge. The retirement of the baby boom generation will put unprecedented strains on the federal government. By 2030, spending for Social Security, Medicare and Medicaid alone will be almost 60 percent of the entire federal budget. And that will present future Congresses with impossible choices — staggering tax increases, immense deficits, or deep cuts in every category of spending." — President Bush, 2006 State of the Union address

The Social Security Administration has calculators to estimate your potential benefit amounts using different retirement dates and different levels of potential earnings. Click here to access the calculators.

Road to Retirement How long before you can collect full benefits? This SSA chart tells you precisely that ... provided, of course, nothing changes: Year of Birth Retirement Age to Receive Full Benefits 1937 or earlier 65 1938 65 and 2 months 1939 65 and 4 months 1940 65 and 6 months 1941 65 and 8 months 1942 65 and 10 months 1943-1954 66 1955 66 and 2 months 1956 66 and 4 months 1957 66 and 6 months 1958 66 and 8 months 1959 66 and 10 months 1960 and later 67

Retiring  Early

Approximately 60 percent of working people choose to start receiving reduced Social Security benefits at age 62. When considering this election, look at your health and your family's history of longevity.

From a mathematical standpoint, it takes approximately 12 years for someone electing benefits at age 65 to receive the same total benefits as someone electing reduced benefits at age 62, assuming both individuals have the same earnings. So if you start collecting full benefits at 65, by age 77 you will have collected just slightly more than a 77 year old who began collecting at age 62.

Of course, no one knows how long they will live, but if you're healthy and expect to live a long life, it might be worthwhile to wait until your full retirement age.

Benefits for a Spouse

Suppose your spouse hasn't worked enough to earn the minimum credits to qualify for benefits. Can he or she collect Social Security?

According to the SSA, even if your spouse has never worked, he or she can, at full retirement age, receive a benefit equal to one-half of your full benefit. Or your spouse can receive benefits at age 62 but the amount will be reduced.

What if your spouse worked but didn’t earn much? The SSA will pay retirement benefits on your spouse’s record of earnings first. But if the spousal benefit on your record is higher, your spouse will get a combination of benefits that equals that higher amount.

Working After Retirement

If you choose to retire before full retirement age but continue to work part-time to earn some money, you might forfeit some benefits. Based on current laws, let's say you begin collecting Social Security at 62. If you have a job and earn more than the current limit of $12,480, your benefits will be reduced $1 for every $2 you earn.

If you expect to earn wages substantially above these limits, you may want to delay receiving benefits.

Note: This only applies to earned income. You can have unlimited unearned income without losing any Social Security benefits. There is no limit on unearned income from sources such as retirement plans, annuities, interest, dividends, and capital gains.

Qualifying for Benefits

The SSA uses its record of your lifetime earnings, listed on your annual statement, to calculate your benefit "credits." In 2006, to earn one credit, you must have received $970 of wages or self-employment income during the quarter. You can earn a maximum of four credits per year. Generally speaking, in order to qualify for Social Security benefits, you must have earned a minimum of 40 credits. In other words, you must have worked 40 quarters. In your lifetime, you will probably earn far more credits than you need to qualify. However, extra credits do not increase benefits.

Whatever decisions you make regarding retirement, don't plan to rely on Social Security alone. Even today, the full benefit is only enough to provide a supplement for most people, rather than the entire nest egg. And given the changing nature of Social Security, there's no way to know what will happen in the future.

Of course, we all hope to see the money we paid into the system. But while politicians debate how to overhaul Social Security, the rest of us need to be feathering our own nests with savings in private retirement accounts. Consult with your financial or tax adviser on ways to create a retirement plan for you to follow.