By Cristin H. Rigg, CFP®, CDFA™

After a lifetime of hearing grandparents and parents discuss their Social Security, baby boomers (people born 1946 – 1964) are realizing it is now their turn to collect. This 82-year-old program, originally designed to help senior citizens escape poverty in their older age, is actually available to anyone who has paid into the system and reached retirement age.

The following is a broad overview to help you start thinking about Social Security as a valuable resource for your retirement and a benefit that should be closely examined and coordinated with your overall retirement plan.

What is Social Security?

Social Security was established in 1935 to alleviate poverty among the elderly during the Great Depression. It was created as a self-financing program that would collect payroll taxes from workers which would immediately be paid out in benefits to retirees.

Millions of Americans depend on Social Security. For many, it is their primary source of retirement income. For others, it is an important supplement to pensions and personal savings.

What are the benefits of Social Security?

Unlike other sources of income, Social Security offers a unique combination of benefits, including:

• Steady, lifetime income
• Annual inflation adjustments
• Spousal and survivor benefits
• Strategies to maximize benefits

How much can you expect to receive?

The exact amount of your benefit is not computed until you reach age 62. At that time, your annual earnings are indexed to account for wage inflation. Once each year’s earnings are indexed for inflation, your highest 35 years of earnings are tallied and used in a three-tiered formula to arrive at your monthly benefit.

If you worked more than 35 years, only the highest 35 years will count. If you worked less than 35 years, the missing years will count as zeros. The higher your earnings, the higher your monthly Social Security benefit will be at your full retirement age.

When can you begin receiving benefits?

Full retirement age is the age at which you may begin receiving your full, unreduced benefit. For people born between 1943 and 1954, full retirement age is 66. For those born after 1960, it is age 67.
Early eligibility for Social Security begins at age 62. If you apply at this age, your benefit will be reduced. If you delay the start of benefits past full retirement age, you will earn delayed credits. For each year you delay the start of benefits, your benefit increases by 8% per year up to age 70 (in addition to annual inflation adjustments).

When should you apply for benefits?

This is the biggest question facing baby boomers today, and one of the most crucial aspects of Social Security planning. Anyone approaching age 62 is wondering: should I apply for benefits as early as possible and grab as much as I can, as soon as I can? Or, should I wait until age 66 or even age 70, in order to receive a higher amount?

The answer depends on many factors, including your health, current and future income needs, survivor needs, and much more. The when-to-apply question should be considered in the context of your overall retirement plan. In many cases, the best choice could be to select the strategy that will give you the highest income later on, when you are likely to need it the most.

Where can you go for more information?

The Social Security website ( is a good starting point, as it offers a wealth of information. You can establish an account by clicking on the “sign in / up” box and then the “my Social Security” box. From there, you can download your annual statements, review your earnings record, and estimate your benefits. Once you’ve visited the site, meet with a qualified professional to customize the best strategy for you and your specific circumstances.