History

• Our forefathers did not intend for Social Security to provide 100 percent of the needed income for retirement when enacting the law in 1935. The Social Security Administration suggests that other income could come from "pensions, savings and investments." Social Security benefits and regulations have changed over the years, with the most significant changes made in 1983. Implementation of taxation of Social Security, bringing federal workers under the Social Security umbrella and setting full retirement age on a gradual advancement schedule were changes enacted that year.
  
  

Significance

• How long you work and how much money you make while employed determine the amount of Social Security benefits you receive. The Social Security Administration sends a statement once a year to workers over age 25 listing estimated monthly benefits at full retirement age. Full retirement age is determined by birth date, and is age 66 or 67 in 2010. If you choose to retire earlier than full retirement age, you will see a benefits reduction by as much as 25 percent; if you choose to take late retirement after your full retirement age, your benefits increase approximately 8 percent a year.
  
  

Features

• Social Security allows you to work while collecting benefits. You must be 62 and have 40 quarters or 10 years of employment history, paying into the Social Security system, to collect benefits. If you meet the criteria, you can apply for benefits three months before you want to retire. If you make over a specified amount a year ($14,160 in 2010) when collecting Social Security before the year you reach full retirement age, Social Security imposes a penalty of $1 for every $2 you earn over the threshold amount. The year you reach full retirement age has more liberal calculations, and the penalty is $1 for every $3 over the limit, only until you reach full retirement age that year. There is no penalty once you reach full retirement.
  
  

Considerations

• If you work and collect early benefits and receive a penalty, Social Security will recalculate your benefits when you reach full retirement age, adjusting for those penalty months in your favor. You may receive slightly more benefits after recalculation. Social Security benefits will change slightly, but not significantly, over the worker's retirement life.
  
  

Potential

• The AARP suggests that you reduce expenses by downsizing and move to a lower-cost locale. Work for additional years to accumulate more savings, or work part-time. Choose a later date to take Social Security retirement to get a larger monthly check. If you are married and your spouse is retirement age, she may collect her own benefits or a combination of hers and yours to total 50 percent of what you receive.