One part of your retirement income will be Social Security. It's important to understand your basic Social Security benefits as well as how much (or how little) a part of your total retirement income this will be.

How Social Security Will Change
The Social Security program was created after the Great Depression that followed the 1929 stock market crash. Things were different all those years ago-life expectancy was an average of 61.7 years, and the retirement age for Social Security was set at 65. The government was obviously not expecting to pay out for too many persons or for too many years. Today the average life expectancy is 76.7, so Social Security benefits are paid to many more people and for a longer time. In addition, about 79 million baby boomers will start to retire in 2010. In 30 years or so, there will be nearly twice as many older Americans as there are today. Watch for Congress to change how Social Security benefits are administered to handle the demographic shifts, and plan to update your financial retirement goals if the changes affect you.

How Much Can You Expect from Social Security?
For your current planning, you must know how much income to expect from Social Security in your retirement years. One way to get this information is to use the Social Security benefit charts on the Social Security Web site (http://www.ssa.gov). Go to the Retirement Planner at this site and use the Quick Calculator. Enter your age and income, and the calculator will give you your estimated benefit for your retirement at ages 62 (first eligible), 65-67 (whatever is your specific normal retirement age), and 70 (maximized-benefit age). The calculation is based on the assumption that you will earn enough credits through your work to qualify for benefits, and the actual amount you receive will be determined by using your 35 highest earning years.

Use Your Annual Statement
A second way to get benefits estimates is to use the statement that is sent to you every year, about three months before your birthday, by the Social Security Administration. About three months before your birthday, you will receive your Social Security Statement. This personal record of earnings on which you have paid Social Security taxes will provide you with a summary of the estimated benefits you may receive.

These statements are automatically mailed to workers who are over 25 and are eligible—that is, those who have worked in Social Security-covered employment, are not yet receiving benefits, and for whom Social Security can find a current mailing address. If you want to receive your annual statement at a different time, you can request it online and it will be mailed to you in two to four weeks. This requested statement will take the place of the one that would have been automatically sent to you that year. Whenever you receive your statement, review it to make sure your reported earnings and other information are correct. If you find mistakes, let Social Security know!

Find your estimated benefits, and consider this to be the beginning or foundation of financial planning. Determine how much more you will need and prepare to close the gap through your pension plan, if you have one, and your own retirement savings and other savings.