When Should I Apply? Approximately three months before you want the benefits to begin, this allows the SSA time to file the paperwork and get things in order.

How Can I Apply? There are three ways:

1. Online: It’s easy to apply through the SSA website, or,
2. Telephone: 1-800-772-1213, they can take your application over the phone or,
3. In Person: You can go into an SSA office to fill out and submit your application. To schedule something, you can call 1-800-772-1213.

What Information Will You Need?

• your Social Security number
• your birth certificate
• your W-2 forms or self-employment tax return for last year
• your military discharge papers if you had military service
• your spouse’s birth certificate and Social Security number if he or she is applying for benefits;
• children’s birth certificates and Social Security numbers, if applying for children’s benefits;
• proof of U.S. citizenship or lawful alien status if you (or a spouse or child is applying for benefits) were not born in the U.S.; and
• the name of your bank and your account number so your benefits can be directly deposited into your account.

They will want a certified copy of your documents or the original, I recommend sending in certified copies because you don’t want to have your originals lost in the mail (especially documents like your birth certificate).

That’s it!

The full retirement age for social security depends on when you were born and will determine when you can begin collecting social security. If you were born in 1937 or earlier, your full retirement age is 65. If you were born 1960 or later, your full retirement age is 67. The Social Security Administration has provided this chart for figuring out when your full retirement age is (clicking on the year will take you to the SSA’s page for that age group, breaking down the rules even more clearly).

With Social Security, you can start taking benefits as early 62 if you’re willing to take a hit on your overall benefits. Depending on a number of factors, if you start taking Social Security payments at a reduced rate when you’re 62, your total benefit could be reduced by as much as 25%. To maximize your total Social Security benefit, you should wait until the full retirement age or later (if you’re willing to wait until 70 until you take the benefit, that’s when you’ll get the most).

The problem is that there are so many factors involved that telling someone to wait until 70 or start at 62 may not be the best idea. If you pass away before you benefits are paid out, your spouse still gets survivorship benefits so if you’re concerned about your life span, that’s no reason to start taking benefits early. (if you have a strong financial reason, as in loss of income or increase in expenses, that would be a reason to start taking benefits)

It helps to play with social security calculators (use these if you have your benefits paper), of which there are many but none of which are tied to your actual benefits.

If you earn a salary and want to collect benefits from social security, you have to pass the social security administration’s “earnings test.” While the earnings test looks like a penalty on those who collect a salary, it’s really not and I’ll explain why in a moment.

First, to calculate your “penalty,” you have to look at a few factors. Are you under the “full retirement age?” If so, then if you start receiving Social Security payments and earn income, your benefits will be reduced by half of what you earn over the annual limit. The 2008 annual limit is $13,560. If you earned $13,562, or $2 over the limit, then your Social Security payment will be decreased by $1.

In the year of your full retirement age, the “penalty” is 33% of what you earn over an even higher limit. That higher limit in 2008 is $36,120. When you reach full retirement, the reductions end and you are no longer “penalized.”

Why is it not a penalty? It’s not because when you reach full retirement, your benefits are recalculated and those reductions are added back into your balance. In reality, it’s really just delaying your benefits and not reducing them - which is better for you anyway.

Over 20% of every tax dollar paid by every American goes to paying out Social Security benefits to existing retirees. Twenty percent to existing retirees, not retirees that are going to retire in the future, just the ones collecting checks right now. Did you know that 6.2% of your salary goes towards Social Security and another 6.2% is paid by your employer? That’s only 12.4%, which means it looks like we have a shortfall of 6.6% each and every dollar for Social Security. Ouch.

I’m not complaining about what I have to pay or whatever, I’m just saying that the math doesn’t lie… Social Security is in trouble, right?

Source: Yahoo Finance

US News and World Report had a little piece where they discussed some good New Year’s resolutions related to retirement and I thought that I’d put each of them through their paces. The sixth retirement resolution was to review your Social Security statement.

Watch for your Social Security statement in the mail each year, says Salisbury. Be sure to review it for accuracy and contact the Social Security Administration with any corrections.

I don’t know if I’d spend too much time checking out your social security statement because there isn’t much you can do about it. It’s important to know what your benefits are come retirement, just so that when you’re planning you have all the pertinent information.

When should you receive your social security statement? Your social security statement is automatically sent to you three months before your birthday. If you were born in March, expect your social security statement in December. If you really want your statement, you can request for your statement.

Source: US News and World Report

If you enjoy a nice helping of humor along with the usual dry subject of personal finance, Motley Fool is the website for you. I was poking around their content rich site the other day when I decided to pop my head into their retirement section and found an article written by Robert Brokamp (TMF Bro) titled: 5 Retirement Must-Knows - Everything you need to know about retirement planning on a single Web page. Well, given such an auspicious title, I just had to take a look. What were these five must-knows and were they really must knows?

You can’t look to your parent’s retirement as a guide for your own. What this means is that when you retire in twenty to forty years (even then, someone retiring in twenty will have a different retirement than someone retiring in forty) years, you’ll have to face challenges that your parents may not be facing right now. You will probably live more actively and live longer, enjoy more things, and generally need more income to sustain you in your later non-active income years. So while you’ll need more, you have more weapons at your disposal in the retirement battle because thirty years ago IRAs and 401Ks were unheard of. Everyone thought they’d retire on pensions and social security… which leads into the second must know.

You’re on your own. Retirement can be seen as a three-legged stool, propped up on Social Security, defined benefit plans, and your own savings. Social security is underfunded, people aren’t staying long enough at jobs to build up a large enough benefit in pensions and other defined benefit plans, which leaves savings as the only real dependable retirement option left for many folks.

Starting saving now. It’s never too early or too late to begin saving for retirement. The earlier, of course, the better; but starting late means you started, which is better than not having started, right? The article has a slick looking picture that you should check out that shows growth curves based on when you started, your investment return, and how much is saved.

Stocks are better than bonds. We all understand that stocks are better than bonds, but how much better are they?

According to Jeremy Siegel’s Stocks for the Long Run, for every rolling five-year investing period from 1802 to 2002 (i.e., 1802-1807, 1803-1808, etc.), stocks outperformed bonds 80% of the time. Stocks beat bonds for 90% of the rolling 10-year periods, and essentially 100% of the rolling 30-year periods. For holding periods of 17 years or more, stocks have always beaten inflation, a claim bonds can’t make.

Does this mean that you should put 100% into stocks? No! Put a mix that makes sense for you. What makes sense for you? Read up on asset allocation but the gist is the younger you are, the more you should put in stocks because you can weather the downturns because you have the benefit of time. If you’re close to retirement, you don’t want to have to weather downturns.

Defer taxes if you can. There are a lot of defined contribution plans, now that the defined benefit plans are going away, that allow you to defer your income (and taxes!) into your retirement years so you had better take advantage of them. Why is this smart? Your contributions aren’t taxed until you withdraw them and your earnings aren’t taxed until you withdraw them either, so you have a bigger investment bucket to grow into your later years. Use them!

Source: Motley Fool

The “Retirement and Planning Center” at Yahoo Finance has a great article from USA Today that outlines a retirement strategy for every age group - 20 to 29, 30 to 39, 40 to 49, and 50 to 59. As expected, the younger you are the more aggressive (emphasis on growth) they recommend you be and the older the more conservative (emphasis on income) they recommend you be. Within each age group they also give advice as to what you should do with respect to your retirement options, like your 401(k) and Roth IRA, and other major financial decisions, like saving for a house or for college for your kids.

20 to 29
Investing breakdown: 50% in an S&P 500 index fund, 25% in a small cap fund, 25% in an international fund. Start your 401(k) and contribute up to the company match, start a Roth IRA, start an emergency fund, and create a living will.

30 to 39
Investing breakdown: 50% in an S&P 500 index fund, 20% in an international fund, 15% in a small cap fund, and 15% in a mid-cap growth fund. Don’t sacrifice retirement savings to save for college for your kids, keep contributing to your 401(k), and don’t confuse whole life insurance with a retirement plan. It’s good to have but it’s not a retirement plan. Write a will.

40 to 49
Investing breakdown: 40% in an S&P 500 index fund, 15% in an international fund, 15% in a small cap fund, 15% in a mid-cap growth fund, and 15% in a bond fund. Max out that 401(k), be sure your emergency fund is 2-3x your monthly expenses, be sure your mortgage ends when you stop working, fund your Roth IRA or other tax efficient alternatives, and update that living will.

50 to 59
Investing breakdown: 30% in an S&P 500 index fund, 30% in a bond fund, 10% in a small cap fund, 15% in a mid-cap growth fund, 10% in a mid-cap blend stock, and 10% in an international fund. Review your life insurance plan, increase savings, and utilize catch-up provisions for your retirement accounts. When you hit 55, review your Social Security benefits and any pension plans you may be a part of. Finally, update that will again.

via Yahoo! Finance.

Gerri Willis’ Top Tips column (wasn’t it Five Tips?) recently tackled the subject of when you should collect social security and what I gathered from her advice was that it depends. You can start collecting social security when you hit the age of 62 and you must start collecting it when you hit full retirement age at 67, so how do you pick when you start?

First, calculate how much you can get with their social security calculator.

Here are the factors she lists:
1. Guaranteed Income - The idea of guaranteed income is tricky in and of itself, though she doesn’t go into it, because there isn’t much in life that’s guaranteed. I’ve discussed the dangers of fixed annuities in the past (they can get destroyed by inflation) and those issues affect all other “guaranteed” type securities.
2. Lifespan - Considering how long or how short you are likely to live, you might want to adjust when you start taking social security payments.

Lastly, she recommends you talk to experts (always a good idea!):

The Social Security Administration recommends that people talk to one its representatives at least a year before they plan to sign up for benefits. They’ll take a close look at your particular situation, and give you advice based on what they see. You can call them toll free at 1-800-772-1213, or pay a visit to your local Social Security office.

Source: CNN Money.