Boomers are on their own when it comes to planning for later life as pensions disappear from the workplace.
Social Security checks--the closest thing to a sure bet in most retirement budgets--are expected to play an ever-larger role in older Americans' financial security. The process of getting that check, however, is sure to raise some questions for boomers. Of course, you can keep things simple and take the plunge on your 62nd birthday...like about half of workers do. Even, if that's your plan, you owe it to yourself to learn about Social Security and how to get the most out of the system.
Best Calculators and Sources of Information
Start with the Social Security Administration and its Website at: www.ssa.gov
Another useful resource is: www.AnalyzeNow.com a Website devoted to retirement issues. AnalyzeNow.com features a number of helpful articles about Social Security and two calculators that can help users determine the best age to file for benefits.
The National Committee to Protect Social Security and Medicare, a Washington advocacy group, has a spot on it Website where you can email questions called, "Ask Mary Jane" (www.ncpssm.org/maryjane).
The "Social Security Benefits Handbook"--the contents of which are available free from the author, Stanley A. Tomkiel, at: www.socialsecuritybenefitshandbook.com
Earlier this year, the Center for Retirement Research at Boston College published "The Social Security Fix-It Book." You can download a copy free at: http://crr.bc.edu
The most frequently asked question at the Social Security Administration: "How much can I earn and still receive Social Security benefits?"
The best day of the year to visit a Social Security office for the answer to this question is the Friday after Thanksgiving. The agency's local offices are open on that day and are usually very quiet.
Based on a survey of visits to the agency's Website, 315,847 people in the first six months of this year wanted the answer to that question. The question refers to the agency's "earnings test" and the apparent penalty for collecting a salary and Social Security at the same time.
It works this way: If you are under your "full retirement age" (the age at which you qualify for full benefits) when you first receive Social Security payments, and if you have earned income, $1 in benefits will be deducted for each $2 you earn above the annual limit. In 2008, the limit is $13,560.
In the year you reach your full retirement age, the "penalty" shrinks: $1 in benefits is deducted for each $3 you earn above a higher limit, $36,120 in 2008. Then, starting with the month you reach your full retirement age, the deductions end.
What most people don't realize, says Andrew Biggs, deputy commissioner for Social Security, is that once they reach full retirement age, the agency recalculates their future benefits to compensate for any benefits lost due to the earnings test. For most people, Mr. Biggs adds, "the earnings test isn't a 'tax' so much as a delay in benefits, and so they shouldn't stop working or limit their earnings in order to avoid it."
Source: The Wall Street Journal, November 17, 2007